UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2019~~2020

¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period __________ to __________

Commission File Number: 001-38534

Amerant Bancorp Inc.

(Exact Name of Registrant as Specified in Its Charter)



Florida		65-0032379
(State or other jurisdiction of incorporation or organization)		~~65-0032379~~ (I.R.S. Employer Identification No.)
220 Alhambra Circle
Coral Gables,	Florida	33134
(Address of principal executive offices)		(Zip Code)
(305)		460-4038
Registrant’s telephone number, including area code
Former name, former address and former fiscal year, if changed since last report: N/A

~~Former Name, as listed on the last report:~~

~~Mercantil Bank Holding Corporation~~

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbols	Name of exchange on which registered
Class A Common Stock	AMTB	NASDAQ
Class B Common Stock	AMTBB	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yesý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



Class		Outstanding as of August ~~12, 2019~~7, 2020
Class A Common Stock, $0.10 par value per share		~~28,985,996~~28,873,196 shares of Class A Common Stock
Class B Common Stock, $0.10 par value per share		~~14,218,596~~13,286,137 shares of Class B Common Stock

AMERANT BANCORP INC. AND SUBSIDIARIES

FORM 10-Q

June 30, ~~2019~~2020

INDEX



~~PART I.~~	~~FINANCIAL INFORMATION~~	Page
~~Item 1~~PART I.	FINANCIAL INFORMATION
Item 1	Financial Statements	3
	Consolidated Balance Sheets as of June 30, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019	3
	Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six month periods ended June 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six ~~months~~month periods ended June 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	7
	Notes to Interim Consolidated Financial Statements (Unaudited)	9
	Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies	9
	Note 2. ~~Securities~~Interest Earning Deposits with Banks	1213
	Note 3. Securities	13
	Note 4. Loans	15
	Note 4.5. Allowance for Loan Losses	1718
	Note 5.6. Time Deposits	2324
	Note 6.7. Advances from the Federal Home Loan Bank and Other Borrowings	23
	~~Note 7. Derivative Instruments~~	24
	Note 8. ~~Stock-based Incentive Compensation Plan~~	25
	~~Note 9. Income Taxes~~Senior Notes	25
	Note ~~10. Accumulated Other Comprehensive Income (Loss)~~9. Junior Subordinated Debentures Held by Trust Subsidiaries	25
	Note ~~11. Stockholders’ Equity~~10. Derivative Instruments	27
	Note ~~12. Commitments and Contingencies~~11. Stock-based Incentive Compensation Plan	28
	Note ~~13. Fair Value Measurements~~12. Income Taxes	29
	Note 13. Accumulated Other Comprehensive Income (“AOCI”)	30
	Note 14. ~~Earnings Per Share~~Stockholders’ Equity	32
	~~Item 2~~Note 15. Commitments and Contingencies	32
	Note 16. Fair Value Measurements	33
	Note 17. Earnings Per Share	35
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
	~~Forward Looking Statements~~	34
	~~Overview~~	36
	~~Results of Operations~~Cautionary Notice Regarding Forward-Looking Statements	4636
	~~Financial Condition~~Overview	5941
	Selected Financial Information	50
	Results of Operations	56
	Financial Condition	72
Item 3	Quantitative and Qualitative Disclosures About Market Risk	7996
Item 4	Controls and Procedures	83100
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	85102
Item 1A	Risk Factors	86102
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	86107
Item 3	Defaults Upon Senior Securities	86107
Item 4	Mine Safety Disclosures	86107
Item 5	Other Information	86107
Item 6	Exhibits	87108
	Signatures	88109

Table of Contents

Part 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Amerant Bancorp Inc. and Subsidiaries

Consolidated Balance Sheets


(in thousands, except per share data)	(Unaudited) June 30, 2019			December 31, 2018
(in thousands, except share data)							(Unaudited) June 30, 2020		December 31, 2019
Assets
Cash and due from banks	$	25,813		$	25,756		$	35,651	$	28,035
Interest earning deposits with banks	64,504			59,954			181,698		93,289
Cash and cash equivalents	90,317			85,710			217,349		121,324
Securities
Available for sale	1,501,222			1,586,051
Held to maturity	81,240			85,188
Debt securities available for sale							1,519,784		1,568,752
Debt securities held to maturity							65,616		73,876
Equity securities with readily determinable fair value not held for trading							24,425		23,848
Federal Reserve Bank and Federal Home Loan Bank stock	68,170			70,189			64,986		72,934
Securities	1,650,632			1,741,428			1,674,811		1,739,410
Loans held for investment, gross	5,812,755			5,920,175			5,872,271		5,744,339
Less: Allowance for loan losses	57,404			61,762			119,652		52,223
Loans held for investment, net	5,755,351			5,858,413			5,752,619		5,692,116
Bank owned life insurance	208,965			206,142			214,693		211,852
Premises and equipment, net	124,456			123,503			128,327		128,824
Deferred tax assets, net	7,014			16,310			15,647		5,480
Goodwill	19,193			19,193			19,506		19,506
Accrued interest receivable and other assets	70,898			73,648			107,771		66,887
Total assets	$	7,926,826		$	8,124,347		$	8,130,723	$	7,985,399
Liabilities and Stockholders' Equity
Deposits
Demand
Noninterest bearing	$	785,727		$	768,822		$	956,351	$	763,224
Interest bearing	1,183,051			1,288,030			1,186,613		1,098,323
Savings and money market	1,510,832			1,588,703			1,447,661		1,475,257
Time	2,339,771			2,387,131			2,434,077		2,420,339
Total deposits	5,819,381			6,032,686			6,024,702		5,757,143
Advances from the Federal Home Loan Bank and other borrowings	1,125,000			1,166,000			1,050,000		1,235,000
Senior notes							58,419		—
Junior subordinated debentures held by trust subsidiaries	118,110			118,110			64,178		92,246
Accounts payable, accrued liabilities and other liabilities	57,967			60,133			103,226		66,309
Total liabilities	7,120,458			7,376,929			7,300,525		7,150,698
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 15)

Stockholders’ equity
Class A common stock, $0.10 par value, 400 million shares authorized; 28,985,996 shares issued and outstanding (2018: 26,851,832 shares issued and outstanding)	2,899			2,686
Class B common stock, $0.10 par value, 100 million shares authorized; 17,751,053 shares issued; 14,218,596 shares outstanding (2018: 16,330,917 shares outstanding)	1,775			1,775
Class A common stock, $0.10 par value, 400 million shares authorized; 28,873,196 shares issued and outstanding (2019 - 28,927,576 shares issued and outstanding)							2,887		2,893
Class B common stock, $0.10 par value, 100 million shares authorized; 13,286,137 shares issued and outstanding (2019: 17,751,053 shares issued; 14,218,596 shares outstanding)							1,329		1,775
Additional paid in capital	417,338			385,367			359,028		419,048
Treasury stock, at cost; 3,532,457 shares of Class B common stock (2018: 1,420,136 shares of Class B common stock)	(46,373		)	(17,908		)
Treasury stock, at cost; 3,532,457 shares of Class B common stock in 2019.							—		(46,373		)
Retained earnings	419,590			393,662			432,227		444,124
Accumulated other comprehensive income (loss)	11,139			(18,164		)
Accumulated other comprehensive income							34,727		13,234
Total stockholders' equity	806,368			747,418			830,198		834,701
Total liabilities and stockholders' equity	$	7,926,826		$	8,124,347		$	8,130,723	$	7,985,399

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019
Interest income
Loans	$	53,483		$	66,801		$	113,271		$	133,523
Investment securities	10,628			11,886			21,693			24,467
Interest earning deposits with banks	56			539			518			1,543
Total interest income	64,167			79,226			135,482			159,533

Interest expense
Interest bearing demand deposits	104			301			239			575
Savings and money market deposits	1,569			4,014			4,835			7,747
Time deposits	12,406			12,740			25,890			25,293
Advances from the Federal Home Loan Bank	3,110			6,292			7,522			12,497
Senior notes	84			—			84			—
Junior subordinated debentures	571			2,090			1,360			4,195
Total interest expense	17,844			25,437			39,930			50,307
Net interest income	46,323			53,789			95,552			109,226
Provision for (reversal of) loan losses	48,620			(1,350		)	70,620			(1,350		)
Net interest income (loss) after provision for (reversal of) loan losses	(2,297		)	55,139			24,932			110,576

Noninterest income
Deposits and service fees	3,438			4,341			7,728			8,427
Brokerage, advisory and fiduciary activities	4,325			3,736			8,458			7,424
Change in cash surrender value of bank owned life insurance	1,427			1,419			2,841			2,823
Securities gains, net	7,737			992			17,357			996
Cards and trade finance servicing fees	273			1,419			668			2,334
(Loss) gain on early extinguishment of advances from the Federal Home Loan Bank, net	(66		)	—			(73		)	557
Data processing and fees for other services	—			365			—			885
Other noninterest income	2,619			1,875			4,684			3,857
Total noninterest income	19,753			14,147			41,663			27,303

Noninterest expense
Salaries and employee benefits	21,570			34,057			50,896			67,494
Occupancy and equipment	4,220			4,232			8,023			8,274
Telecommunication and data processing	3,157			3,233			6,621			6,259
Professional and other services fees	3,965			3,954			6,919			7,398
Depreciation and amortization	1,960			2,010			3,919			3,952
FDIC assessments and insurance	1,240			1,177			2,358			2,570
Other operating expenses	628			4,242			2,871			8,903
Total noninterest expenses	36,740			52,905			81,607			104,850
(Loss) Income before income tax	(19,284		)	16,381			(15,012		)	33,029
Income tax benefit (expense)	4,005			(3,524		)	3,115			(7,101		)
Net (loss) income	$	(15,279	)	$	12,857		$	(11,897	)	$	25,928

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data) 2019 2018 2019 2018
Interest income
Loans $ 66,801
$ 62,448
$ 133,523
$ 122,118
Investment securities 11,886
12,709
24,467
24,450
Interest earning deposits with banks 539
759
1,543
1,279
Total interest income 79,226
75,916
159,533
147,847

Interest expense
Interest bearing demand deposits 301
113
575
202
Savings and money market deposits 4,014
3,104
7,747
5,688
Time deposits 12,740
10,172
25,293
18,872
Advances from the Federal Home Loan Bank 6,292
6,511
12,497
12,501
Junior subordinated debentures 2,090
2,025
4,195
3,960
Securities sold under agreements to repurchase —
2
—
2
Total interest expense 25,437
21,927
50,307
41,225
Net interest income 53,789
53,989
109,226
106,622
(Reversal of) provision for loan losses (1,350 ) 150
(1,350 ) 150
Net interest income after (reversal of) provision for loan losses 55,139
53,839
110,576
106,472

Noninterest income
Deposits and service fees 4,341
4,471
8,427
9,053
Brokerage, advisory and fiduciary activities 3,736
4,426
7,424
8,841
Change in cash surrender value of bank owned life insurance 1,419
1,474
2,823
2,918
Cards and trade finance servicing fees 1,419
1,173
2,334
2,235
Gain on early extinguishment of advances from the Federal Home Loan Bank —
882
557
882
Securities gains, net 992
16
996
16
Data processing and fees for other services 365
613
885
1,494
Other noninterest income 1,875
1,931
3,857
3,492
Total noninterest income 14,147
14,986
27,303
28,931

Noninterest expense
Salaries and employee benefits 34,057
34,932
67,494
68,973
Occupancy and equipment 4,232
4,060
8,274
7,775
Professional and other services fees 3,954
5,387
7,398
11,831
Telecommunication and data processing 3,233
3,011
6,259
6,095
Depreciation and amortization 2,010
1,945
3,952
4,086
FDIC assessments and insurance 1,177
1,468
2,570
2,915
Other operating expenses 4,242
1,835
8,903
6,608
Total noninterest expenses 52,905
52,638
104,850
108,283
Net income before income tax 16,381
16,187
33,029
27,120
Income tax expense (3,524 ) (5,764 ) (7,101 ) (7,268 )
Net income $ 12,857
$ 10,423
$ 25,928
$ 19,852

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data) 2019 2018 2019 2018

Other comprehensive income (loss), net of tax
Net unrealized holding gains (losses) on securities available for sale arising during the period $ 14,313
$ (5,454 ) $ 30,591
$ (20,431 )
Net unrealized holding gains (losses) on cash flow hedges arising during the period —
2,139
(11 ) 6,352
Reclassification adjustment for net (gains) losses included in net income (1,025 ) 2
(1,277 ) 159
Other comprehensive income (loss) 13,288
(3,313 ) 29,303
(13,920 )
Comprehensive income $ 26,145
$ 7,110
$ 55,231
$ 5,932

Earnings Per Share (Note 14):
Basic earnings per common share $ 0.30
$ 0.25
$ 0.61
$ 0.47
Diluted earnings per common share $ 0.30
$ 0.25
$ 0.60
$ 0.47



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2020			2019			2020			2019

Other comprehensive income, net of tax
Net unrealized holding gains on debt securities available for sale arising during the period	$	9,361		$	14,313		$	36,063		$	30,591
Net unrealized holding losses on cash flow hedges arising during the period	(160		)	—			(1,674		)	(11		)
Reclassification adjustment for items included in net income	(5,591		)	(1,025		)	(12,896		)	(1,277		)
Other comprehensive income	3,610			13,288			21,493			29,303
Comprehensive (loss) income	$	(11,669	)	$	26,145		$	9,596		$	55,231

Earnings Per Share (Note 17):
Basic (loss) earnings per common share	$	(0.37	)	$	0.30		$	(0.28	)	$	0.61
Diluted (loss) earnings per common share	$	(0.37	)	$	0.30		$	(0.28	)	$	0.60

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Three and Six ~~Months~~Month Periods Ended June 30, ~~2019~~2020 and ~~2018~~2019


	Common Stock							Additional Paid in Capital			Treasury Stock				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Total Stockholders' Equity			Common Stock											Additional Paid in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income				Total Stockholders' Equity
(in thousands, except share data)	Shares Outstanding			Issued Shares - Par Value										Shares Outstanding												Issued Shares - Par Value
(in thousands, except share data)	Class A	Class B		Class A		Class B				Additional Paid in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Class A			Class B		Class A			Class B						Additional Paid in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income
Balance at December 31, 2017	24,737,470	17,751,053		$	2,474	$	1,775				$	367,505							$	—			$	387,829		$	(6,133	)	$	753,450
Dividends	—	—		—		—		—			—				(40,000		)		—				(40,000		)
Net income	—	—		—		—		—			—				19,852				—				19,852
Other comprehensive loss	—	—		—		—		—			—				—				(13,920		)		(13,920		)
Balance at June 30, 2018	24,737,470	17,751,053		$	2,474	$	1,775	$	367,505		$	—			$	367,681			$	(20,053	)		$	719,382

Balance at December 31, 2018	26,851,832	16,330,917		$	2,686	$	1,775	$	385,367		$	(17,908	)		$	393,662			$	(18,164	)		$	747,418
Common stock issued	2,132,865	—		213		—		29,005			—				—				—				29,218
Balance at December 31, 2019																										28,927,576			14,218,596		$	2,893		$	1,775		$	419,048				$	(46,373		)		$		444,124				$	13,234		$	834,701
Repurchase of Class B common stock	—	(2,112,321	)	—		—		—			(28,465		)		—				—				(28,465		)	—			(932,459	)	—			—			—				(15,239		)			—					—				(15,239	)
Treasury stock retired																										—			—		—			(446		)	(61,166		)		61,612				—				—				—
Restricted stock issued	1,299	—		—		—		—			—				—				—				—			6,591			—		1			—			(1		)		—				—				—				—
Restricted stock surrendered																										(129	)		—		—			—			(2		)		—				—				—				(2		)
Restricted stock forfeited																										(54,462	)		—		(6		)	—			6				—				—				—				—
Stock-based compensation expense	—	—		—		—		2,966			—				—				—				2,966			—			—		—			—			392				—				—				—				392
Net income	—	—		—		—		—			—				25,928				—				25,928			—			—		—			—			—				—				3,382				—				3,382
Other comprehensive income	—	—		—		—		—			—				—				29,303				29,303			—			—		—			—			—				—				—				17,883				17,883
Balance at June 30, 2019	28,985,996	14,218,596		$	2,899	$	1,775	$	417,338		$	(46,373	)		$	419,590			$	11,139			$	806,368
Balance at March 31, 2020																										28,879,576			13,286,137		$	2,888		$	1,329		$	358,277			$	—			$	447,506			$	31,117			$	841,117
Restricted stock forfeited																										(9,819	)		—		(1		)	—			1				—				—				—				—
Restricted stock units vested																										3,439			—		—			—			—				—				—				—				—
Stock-based compensation expense																										—			—		—			—			750				—				—				—				750
Net loss																										—			—		—			—			—				—				(15,279		)		—				(15,279		)
Other comprehensive income																										—			—		—			—			—				—				—				3,610				3,610
Balance at June 30, 2020																										28,873,196			13,286,137		$	2,887		$	1,329		$	359,028			$	—			$	432,227			$	34,727			$	830,198



	Common Stock							Additional Paid in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
(in thousands, except share data)	Shares Outstanding			Issued Shares - Par Value
(in thousands, except share data)	Class A	Class B		Class A		Class B
Balance at December 31, 2018	26,851,832	16,330,917		$	2,686	$	1,775	$	385,367	$	(17,908	)	$	393,662	$	(18,164	)	$	747,418
Common stock issued	2,132,865	—		213		—		29,005		—			—		—			29,218
Repurchase of Class B common stock	—	(2,112,321	)	—		—		—		(28,465		)	—		—			(28,465		)
Restricted stock issued	1,299	—		—		—		—		—			—		—			—
Stock-based compensation expense	—	—		—		—		1,492		—			—		—			1,492
Net income	—	—		—		—		—		—			13,071		—			13,071
Other comprehensive income	—	—		—		—		—		—			—		16,015			16,015
Balance at March 31, 2019	28,985,996	14,218,596		$	2,899	$	1,775	$	415,864	$	(46,373	)	$	406,733	$	(2,149	)	$	778,749
Stock-based compensation expense	—	—		—		—		1,474		—			—		—			1,474
Net income	—	—		—		—		—		—			12,857		—			12,857
Other comprehensive income	—	—		—		—		—		—			—		13,288			13,288
Balance at June 30, 2019	28,985,996	14,218,596		$	2,899	$	1,775	$	417,338	$	(46,373	)	$	419,590	$	11,139		$	806,368

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2020			2019
Cash flows from operating activities
Net income	$	25,928		$	19,852
Adjustments to reconcile net income to net cash provided by operating activities
(Reversal of) provision for loan losses	(1,350		)	150
Net (loss) income							$	(11,897	)	$	25,928
Adjustments to reconcile net (loss) income to net cash provided by operating activities
Provision for (reversal of) loan losses							70,620			(1,350		)
Net premium amortization on securities	7,164			8,447			7,448			7,164
Depreciation and amortization	3,952			4,086			3,919			3,952
Stock-based compensation expense	2,966			—			1,142			2,966
Change in cash surrender value of bank owned life insurance	(2,823		)	(2,918		)	(2,841		)	(2,823		)
Deferred taxes, securities net gains or losses and others	(2,150		)	(4,374		)
Securities gains, net							(17,357		)	(996		)
Deferred taxes and others							(16,934		)	(597		)
Loss (gain) on early extinguishment of advances from the FHLB							73			(557		)
Net changes in operating assets and liabilities:
Accrued interest receivable and other assets	9,518			(2,075		)	(6,551		)	9,518
Accounts payable, accrued liabilities and other liabilities	(9,736		)	3,071			(652		)	(9,736		)
Net cash provided by operating activities	33,469			26,239			26,970			33,469

Cash flows from investing activities
Purchases of investment securities:
Available for sale	(195,390		)	(121,245		)	(293,027		)	(195,390		)
Federal Home Loan Bank stock	(12,968		)	(13,642		)	(8,538		)	(12,968		)
	(208,358		)	(134,887		)	(301,565		)	(208,358		)
Maturities, sales and calls of investment securities:
Available for sale	313,757			122,805			383,073			313,757
Held to maturity	3,737			1,338			7,886			3,737
Federal Home Loan Bank stock	14,987			9,563			16,486			14,987
	332,481			133,706			407,445			332,481
Net decrease in loans	(109,951		)	(174,197		)
Proceeds from loan portfolio sales	214,416			23,781
Net purchases of premises and equipment, and others	(4,451		)	(3,522		)
Net proceeds from sale of subsidiary	—			7,500
Net cash provided by (used in) investing activities	224,137			(147,619		)
Net increase in loans							(146,318		)	(109,951		)
Proceeds from loan sales							15,235			214,416
Net purchases of premises and equipment and others							(3,331		)	(4,451		)
Net cash (used in) provided by investing activities							(28,534		)	224,137

Cash flows from financing activities
Net decrease in demand, savings and money market accounts	(165,945		)	(165,745		)
Net (decrease) increase in time deposits	(47,360		)	205,910
Net increase (decrease) in demand, savings and money market accounts							253,821			(165,945		)
Net increase (decrease) in time deposits							13,738			(47,360		)
Proceeds from Advances from the Federal Home Loan Bank and other borrowings	590,000			656,000			700,000			590,000
Repayments of Advances from the Federal Home Loan Bank and other borrowings	(630,447		)	(571,000		)	(885,073		)	(630,447		)
Dividend paid	—			(40,000		)
Proceeds from issuance of Senior Notes, net of issuance costs							58,412			—
Redemption of junior subordinated debentures							(28,068		)	—
Proceeds from common stock issued - Class A	29,218			—			—			29,218
Repurchase of common stock - Class B	(28,465		)	—			(15,239		)	(28,465		)
Net cash (used in) provided by financing activities	(252,999		)	85,165
Net increase (decrease) in cash and cash equivalents	4,607			(36,215		)
Common stock retired to cover tax withholding							(2		)	—
Net cash provided by (used in) financing activities							97,589			(252,999		)
Net increase in cash and cash equivalents							96,025			4,607

Cash and cash equivalents
Beginning of period	85,710			153,445			121,324			85,710
End of period	$	90,317		$	117,230		$	217,349		$	90,317

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited) (continued)




	Six Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2020		2019
Supplemental disclosures of cash flow information
Cash paid:
Interest	$	49,868	$	40,491	$	41,037	$	49,868
Income taxes	3,424		15,203		948		3,424

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


1.	Business, Basis of Presentation and Summary of Significant Accounting Policies

a) Business

Amerant Bancorp Inc.~~, formerly Mercantil Bank Holding Corporation,~~ (the “Company”), is a Florida corporation incorporated in 1985, which has operated since January 1987. The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as a result of its 100% indirect ownership of Amerant Bank, N.A. (the “Bank”). The Company’s principal office is in the City of Coral Gables, Florida. The Bank is a member of the Federal Reserve Bank of Atlanta (“Federal Reserve Bank”) and the Federal Home Loan Bank of Atlanta (“FHLB”). The Bank has ~~two~~3 principal subsidiaries, Amerant Investments, Inc., a securities broker-dealer (“Amerant Investments”), ~~and~~ Amerant Trust, N.A, a non-depository trust company (“Amerant Trust”).

~~Beginning~~, and Elant Bank & Trust (the “Cayman Bank”), a bank and trust company domiciled in the second quarter of 2019, the Company is managed using a single segment concept, on a consolidated basis, and management determined to discontinue its separate disclosures of operating segments. See “Reportable Segments” within “~~Basis of Presentation and Summary of Significant Accounting Policies”~~ Cayman Islands acquired in ~~this footnote for further details.~~November 2019.

The Company’s Class A common stock, par value $0.10 per common share, and Class B common stock, par value $0.10 per common share, are listed and trade on the Nasdaq Global Select Market under the symbols “AMTB” and “AMTBB,” respectively.

The Company is managed using a single segment concept, on a consolidated basis, and management determined that no separate current or historical reportable segment disclosures are required under generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Initial Public Offering and Shares Repurchase

On December 21, 2018, the Company completed an initial public offering (the “IPO”). In March 2019, the Company repurchased the remaining shares of its Class B common stock held by Mercantil Servicios Financieros, C.A., the Company’s former parent company (“the Former Parent”). For more information about the IPO and the repurchase of Class B common stock previously held by the Former Parent, see Note 15 to our audited consolidated financial statements included in the Company’s annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on ~~April 1, 2019~~March 16, 2020 (the “Form 10-K”). In

COVID-19 Pandemic

On March ~~2019, following~~11, 2020, the ~~partial exercise~~World Health Organization recognized an outbreak of a novel strain of the ~~over-allotment option by~~coronavirus, COVID-19, as a pandemic.

On March 13, 2020, the ~~IPO’s underwriters, and completion of certain private placements of shares~~President of the ~~Company’s Class A common stock,~~Unites States of America (U.S.) declared a national state of emergency. In response to this outbreak, the governments of many states, cities and municipalities in the U.S., including the States of Florida, New York and Texas, have taken preventative or protective actions, such as imposing restrictions on business operations and advising or requiring individuals to limit or forego their time outside of their homes.

On March 16, 2020, the Company ~~repurchased~~activated its Business Continuity Plan (“BCP”) to continue to provide its products and services during the ~~remaining shares of its Class B common stock held by Mercantil Servicios Financieros, C.A., the~~COVID-19 pandemic. The Company’s ~~former parent company (“MSF” or “the Former Parent”). See Note 11~~BCP plan is framed within regulatory guidelines and subject to ~~these unaudited interim consolidated financial statements for more information about the private placements~~periodic testing and ~~the repurchase of Class B common stock previously held by MSF.~~

~~Rebranding~~

independent audits. On June ~~4, 2019,~~3, 2020, the ~~Company’s stockholders approved an amendment~~Company started Phase 1 of reintroducing employees working remotely back to the ~~Company’s Amended~~workplace. Given the increasing trend in COVID-19 cases in our markets, particularly in Florida and ~~Restated Articles~~Texas, during the month of ~~Incorporation (the “Articles~~June and continuing in July, we are following a careful, phased-approach which includes a voluntary return of ~~Incorporation”)~~a limited number of employees, based on work location, roles and responsibilities, and various safety protocols. Banking centers have returned to ~~change~~regular business hours, following strict federal, state and local government guidelines supporting the ~~Company’s name from “Mercantil Bank Holding Corporation”~~safety of our employees and our customers. Amerant continues to ~~“Amerant Bancorp Inc.” (the “Name Change”). The Name Change became effective~~focus on ~~June 5, 2019. Each of the Company, the Bank and its principal subsidiaries now operate under the “Amerant” brand.~~ serving customers without interruption, while maintaining a safe environment.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), an approximately $2.0 trillion COVID-19 response bill to provide emergency economic relief to individuals, small businesses, mid-size companies, large corporations, hospitals and other public health facilities, and state and local governments, was enacted. The CARES Act allocated the Small Business Administration, or SBA, $350.0 billion to provide loans of up to $10.0 million per small business as defined in the CARES Act. On April 2, 2020, the Bank began participating in the SBA’s Paycheck Protection Program, or “PPP”, by providing loans to these businesses to cover payroll, rent, mortgage, healthcare, and utilities costs, among other essential expenses. On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act, increasing funding to the PPP, was enacted. On July 4, 2020, new legislation was signed into law that extended the deadline to apply for loans under the PPP from June 30, 2020 until August 8, 2020. As of June 30, 2020, total PPP loans were $214.1 million, representing over 2,000 loan applications booked.

On March 26, 2020, the Company began offering loan payment relief options to customers impacted by the COVID-19 pandemic, including interest-only and/or forbearance options. These programs continued in the second quarter of 2020. As of June 30, 2020, loans modified under these programs totaled $1.1 billion. As of this date, loans in these programs on which the interest-only/or forbearance period expired at that date totaled $504.7 million, or 45.4% of total modified loans. The Company collected payments due on $8.4 million of modified loans through June 30, 2020. Modified loans totaling $496.3 million have payments due by July 31, 2020. In accordance with accounting and regulatory guidance, loans to borrowers benefiting from these measures are not considered Troubled Debt Restructurings (“TDRs”). The Company is closely monitoring the performance of these loans under the terms of the temporary relief granted.

b) Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with ~~generally accepted accounting principles in the United States of America (“~~U.S. ~~GAAP”)~~GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required for a fair statement of financial position, results of operations and cash flows in conformity with U.S. GAAP. These unaudited interim consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year or any other period. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, ~~2018~~2019 and ~~2017~~2018 and for each of the three years in the period ended December 31, ~~2018~~2019 and the accompanying footnote disclosures for the Company, which are included in the Form 10-K.

For a complete summary of our significant accounting policies, please see Note 1 to the Company’s audited consolidated financial statements in the Form 10-K.

~~Reportable Segments~~

Prior to the second quarter of 2019, the Company had four reportable segments: Personal and Commercial Banking (“PAC”), Corporate LATAM, Treasury, and Institutional. Results of these segments were presented on a managed basis. This structure was driven, among other things, by how the Company previously managed the business, how internal reporting was prepared and analyzed, and how management made decisions.

Beginning in the second quarter of 2019, all decisions, including those relating to loan growth and concentrations, deposit and other funding, market risk, credit risk, operational risk and pricing are made after assessing their effects on the Company as a whole, using a single segment concept. This change is consistent with the Company’s strategic shift to focus on community banking after the spin-off from its Former Parent in August 2018, and the rebranding of the Company launched in April 2019. As part of this strategic shift, the Company has significantly reduced its international lending activities, which had been largely allocated to the Corporate LATAM segment. As a result, management reassessed the Company’s remaining international business activities as well as the remaining three segments to determine whether the Company would continue to manage these businesses as separate operating segments, or consolidated as one single segment. In performing its assessment, management noted a similarity in the nature of products and services, processes, type of customers, distribution methods, and regulatory environment of its businesses. Further, management determined that it will no longer review discrete financial information related to the remaining operating segments for purposes of assessing performance or to allocate resources.

As a result of the above referenced strategic shift, assessments and determination, the Company is now managed as a single operating segment, on a consolidated basis. Therefore, beginning with the quarter ended June 30, 2019, the Company determined that no separate current or historical reportable segment disclosures are required under U.S. GAAP.

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~~Amerant Bancorp Inc. and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting ~~period.~~periods. Significant estimates made by management include: (i) the determination of the allowance for loan losses; (ii) the fair values of securities and the value assigned to goodwill during ~~the annual~~periodic goodwill impairment ~~test;~~tests; (iii) the cash surrender value of bank owned life insurance; and (iv) the determination of whether the amount of deferred tax assets will more likely than not be realized. Management believes that these estimates are appropriate. Actual results could differ from these estimates.

~~c) Subsequent Events~~

On July 10, 2019 the Company announced the redemption of all $15.0 million of its outstanding 10.60% trust preferred securities issued by its Commercebank Statutory Trust II (“Statutory Trust II”), and all $10.0 million of its outstanding 10.18% trust preferred securities issued by its Commercebank Capital Trust III (“Capital Trust III”). The Capital Trust III securities were redeemed on July 31, 2019 at the contractual call price of 101.018% and the Statutory Trust II securities will be redeemed on September 7, 2019, the earliest call date, at the contractual call price of 100.53%. The Company will simultaneously redeem all $15.5 million and $10.4 million junior subordinated debentures held by its Statutory Trust II and Capital Trust III, respectively, as part of these redemption transactions. These redemptions together will reduce total cash and cash equivalents by approximately $23.8 million, financial liabilities by approximately $25.9 million and other assets by approximately $2.4 million. In addition, third quarter 2019 results will include a total charge of $0.3 million for the premiums paid to security holders from these redemptions. The redemption of these legacy Tier 1 capital instruments will reduce the Company’s Tier 1 equity capital by a total of $23.5 million.

~~The Company’s regulatory capital ratios will continue to exceed regulatory minimums to be well-capitalized, upon these redemptions.~~

In August 2019, the Company entered into interest rate swaps that were designated as cash flow hedges to manage exposure of floating rate interest payments on all of the Company’s outstanding variable-rate junior subordinated debentures. See Note 7 to our unaudited interim consolidated financial statements in this Form 10-Q for details on the interest rate swap transaction.

~~All significant subsequent events have been recognized or disclosed in these unaudited interim consolidated financial statements.~~

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Notes to Interim Consolidated Financial Statements (Unaudited)


2.	~~Securities~~

~~Amortized cost~~

The COVID-19 pandemic has severely restricted the level of economic activity in the U.S. and ~~approximate fair values~~around the world since March 2020. Several states and cities across the U.S., including the States of ~~securities available~~Florida, New York and Texas and cities where the Company has banking centers, LPOs and where the Company’s principal place of business is located, have also implemented quarantines, restrictions on travel, “shelter at home” orders, and restrictions on types of business that may continue to operate. While some of these measures and restrictions have been lifted and certain businesses have reopened in the second quarter 2020, the Company cannot predict when restrictions currently in place may be lifted, or whether restrictions that have been lifted will need to be imposed or tightened in the future if viewed as necessary due to public health concerns.The Company considered the impact of COVID-19 on the significant estimates management used. The Company recorded a provision for ~~sale are summarized~~loan losses of $22.0 million in the three months ended March 31, 2020, mostly driven by $19.8 million of estimated losses reflecting deterioration in the macro-economic environment as ~~follows:~~

June 30, 2019
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
U.S. government sponsored enterprise debt securities $ 930,137
$ 9,440
$ (5,907 ) $ 933,670
Corporate debt securities 268,724
3,186
(204 ) 271,706
U.S. government agency debt securities 201,074
576
(2,910 ) 198,740
Municipal bonds 70,668
2,659
—
73,327
Mutual funds 24,269
—
(490 ) 23,779
Commercial paper —
—
—
—
$ 1,494,872
$ 15,861
$ (9,511 ) $ 1,501,222

December 31, 2018
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
U.S. government sponsored enterprise debt securities $ 840,760
$ 2,197
$ (22,178 ) $ 820,779
Corporate debt securities 357,602
139
(5,186 ) 352,555
U.S. government agency debt securities 221,682
187
(4,884 ) 216,985
Municipal bonds 162,438
390
(2,616 ) 160,212
Mutual funds 24,266
—
(1,156 ) 23,110
Commercial paper 12,448
—
(38 ) 12,410
$ 1,619,196
$ 2,913
$ (36,058 ) $ 1,586,051

Ata result of the impact of COVID-19, compared to no loan loss provision in the three months ended March 31, 2019. The Company recorded a provision for loan losses of $48.6 million in the three months ended June 30, ~~2019~~2020, including $20.2 million related to the estimated deterioration of our loan portfolio caused by the COVID-19 pandemic, compared to a release of loan loss reserves of $1.4 million in the three months ended June 30, 2019. In addition, the Company reviewed goodwill for potential impairment on an interim basis as of June 30, 2020. As as result of its evaluation, the Company determined that goodwill was considered not impaired and, therefore, no impairment charges were recorded. Given the uncertainty regarding the spread and severity of COVID-19 and its adverse effects on the U.S. and global economies, the extent to which the COVID-19 pandemic may impact the anticipated amount of estimated loan defaults and losses and consequently, the adequacy of the provision for loan losses, whether it will result in impairments to goodwill or other intangibles in future periods or, in general, impact the Company’s financial condition or results of operations is uncertain and cannot be accurately predicted at this time.

c) Recently Issued Accounting Pronouncements

Issued and Not Yet Adopted

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

On March 12, 2020, the FASB issued amendments to guidance applicable to contracts, hedging relationships, and other transactions affected that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. These amendments provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, ~~2018,~~2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments also allow entities to make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. These amendments are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply these amendments to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected, these amendments must be applied prospectively for all eligible contract modifications and hedging relationships. The Company ~~had no foreign sovereign or government agency debt securities.~~did not elect any of optional expedients as of June 30, 2020. The Company is in the process of evaluating the implications of these amendments to its current efforts for reference rate reform implementation.

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Notes to Interim Consolidated Financial Statements (Unaudited)

New Guidance on Leases

In December 2018, the Financial Accounting Standards Board (“FASB”) issued amendments to new guidance issued in February 2016 for the recognition and measurement of all leases which has not yet been adopted by the Company. The amendments address certain lessor’s issues associated with: (i) sales taxes and other similar taxes collected from lessees, (ii) certain lessor costs and (iii) recognition of variable payments for contracts with lease and nonlease components. The new guidance on leases issued in February 2016 requires lessees to recognize a right-of-use asset and a lease liability for most leases within the scope of the guidance. There were no significant changes to the guidance for lessors. These amendments, and the related pending new guidance, can be adopted using a modified retrospective transition at the beginning of the earliest comparative period presented, and provides for certain practical expedients.

In May 2020, the FASB again amended the effective date of the new guidance on leases. Previously, the amendments and related new guidance on leases were effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, for private companies. The new guidance on leases is now effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is still permitted.

The Company has completed the process of gathering a complete inventory of its lease contracts, migrating identified lease data onto a new system, and is in the final stages of testing and evaluating the results of testing. Based on these results, we currently expect to recognize an asset and a corresponding lease liability for an amount to be less than 1% of the Company’s total consolidated assets at adoption. The Company plans to adopt the new guidance in its consolidated financial statements for the year ending December 31, 2021.

New Guidance on Accounting for Credit Losses on Financial Instruments

In June 2016, the FASB issued the new guidance on accounting for current expected credit losses on financial instruments (“CECL.”) The new guidance introduces an approach based on expected losses to estimate credit losses on various financial instruments, including loans. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.

In November 2018, the FASB issued amendments to pending new guidance on CECL to, among other things, align the implementation date for private companies’ annual financial statements with the implementation date for their interim financial statements. Prior to the issuance of these amendments, the guidance on accounting for CECL was effective for private companies for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. These amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, for private companies.

In November 2019, the FASB amended the effective date of the new guidance on CECL. Previously, the amendments and related new guidance on CECL was effective for fiscal years beginning after December 15, 2021, and interim periods within those years, for private companies. The new guidance on CECL is now effective for fiscal years beginning after December 15, 2022 and interim periods within those years. Early adoption is still permitted. The new guidance on CECL is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, for public companies.

The Company is currently assessing the impact that these changes will have on its consolidated financial statements, when adopted. As an Emerging Growth Company, or EGC, the Company currently plans to adopt the

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

new guidance on CECL in its consolidated financial statements for the year ending December 31, 2023, or earlier in the event the Company ceases to be an EGC.

d) Subsequent Events

The effects of significant subsequent events, if any, have been recognized or disclosed in these unaudited interim consolidated financial statements.

2. Interest Earning Deposits with Banks

At June 30, 2020 and December 31, 2019, interest earning deposits with banks are mainly comprised of deposits with the Federal Reserve of approximately $182 million and $93 million, respectively. At June 30, 2020 and December 31, 2019, the average interest rate on these deposits was approximately 0.54% and 2.19%, respectively. These deposits mature within one year.


3.	Securities

Amortized cost and approximate fair values of debt securities available for sale are summarized as follows:



	June 30, 2020
	Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. government-sponsored enterprise debt securities	$	807,667	$	24,955	$	(702	)	$	831,920
Corporate debt securities	376,251		12,318		(2,460		)	386,109
U.S. government agency debt securities	230,255		4,653		(2,454		)	232,454
U.S. treasury securities	2,508		7		—			2,515
Municipal bonds	62,168		4,618		—			66,786
	$	1,478,849	$	46,551	$	(5,616	)	$	1,519,784



	December 31, 2019
	Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. government sponsored enterprise debt securities	$	927,205	$	9,702	$	(3,795	)	$	933,112
Corporate debt securities	247,836		5,002		(2		)	252,836
U.S. government agency debt securities	230,384		895		(2,882		)	228,397
U.S. treasury securities	106,112		1		(1,877		)	104,236
Municipal bonds	47,652		2,519		—			50,171
	$	1,559,189	$	18,119	$	(8,556	)	$	1,568,752

At June 30, 2020 and December 31, 2019, the Company had 0 foreign sovereign or foreign government agency debt securities. The Company had investments in foreign corporate debt securities of $16.3 million and $5.2 million at June 30, 2020 and December 31, 2019, respectively.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

In the three and six month periods ended June 30, 2020 and 2019, proceeds from sales, gross realized gains, gross realized losses of debt securities available for sale were as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2020		2019			2020			2019
Proceeds from sales, redemptions and calls of debt securities available for sale	$	100,666	$	103,683		$	239,738		$	216,212

Gross realized gains	7,537		1,125			16,803			1,573
Gross realized losses	—		(133		)	(23		)	(577		)
Realized gains, net	$	7,537	$	992		$	16,780		$	996

The Company’s investment in debt securities available for sale with unrealized losses that are deemed temporary, aggregated by the length of time that individual securities have been in a continuous unrealized loss position, are summarized below:

June 30, 2019
Less Than 12 Months 12 Months or More Total
(in thousands) Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss
U.S. government sponsored enterprise debt securities $ 41,500
$ (307 ) $ 436,675
$ (5,600 ) $ 478,175
$ (5,907 )
Corporate debt securities 305
(1 ) 48,637
(203 ) 48,942
(204 )
Municipal bonds —
—
—
—
—
—
U.S. government agency debt securities 6,402
(42 ) 141,248
(2,868 ) 147,650
(2,910 )
Mutual funds —
—
23,530
(490 ) 23,530
(490 )
Commercial paper —
—
—
—
—
—
$ 48,207
$ (350 ) $ 650,090
$ (9,161 ) $ 698,297
$ (9,511 )



	June 30, 2020
	Less Than 12 Months					12 Months or More					Total
(in thousands)	Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss
U.S. government-sponsored enterprise debt securities	$	63,660	$	(341	)	$	15,430	$	(361	)	$	79,090	$	(702	)
Corporate debt securities	65,800		(2,460		)	—		—			65,800		(2,460		)
U.S. government agency debt securities	19,577		(131		)	92,772		(2,323		)	112,349		(2,454		)
	$	149,037	$	(2,932	)	$	108,202	$	(2,684	)	$	257,239	$	(5,616	)



	December 31, 2019
	Less Than 12 Months					12 Months or More					Total
(in thousands)	Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss
U.S. government sponsored enterprise debt securities	$	239,446	$	(1,740	)	$	180,274	$	(2,055	)	$	419,720	$	(3,795	)
Corporate debt securities	8,359		(1		)	300		(1		)	8,659		(2		)
U.S. government agency debt securities	41,300		(251		)	117,040		(2,631		)	158,340		(2,882		)
U.S. treasury securities	97,471		(1,877		)	—		—			97,471		(1,877		)
	$	386,576	$	(3,869	)	$	297,614	$	(4,687	)	$	684,190	$	(8,556	)

December 31, 2018
Less Than 12 Months 12 Months or More Total
(in thousands) Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss
U.S. government sponsored enterprise debt securities $ 90,980
$ (2,995 ) $ 608,486
$ (19,183 ) $ 699,466
$ (22,178 )
Corporate debt securities 243,667
(3,800 ) 75,762
(1,386 ) 319,429
(5,186 )
Municipal bonds 63,580
(939 ) 133,886
(3,945 ) 197,466
(4,884 )
U.S. government agency debt securities 1,449
(6 ) 94,331
(2,610 ) 95,780
(2,616 )
Mutual funds —
—
22,865
(1,156 ) 22,865
(1,156 )
Commercial paper 12,410
(38 ) —
—
12,410
(38 )
$ 412,086
$ (7,778 ) $ 935,330
$ (28,280 ) $ 1,347,416
$ (36,058 )

At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company held certain debt securities issued or guaranteed by the U.S. government and U.S. government-sponsored entities and ~~agencies were held by the Company.~~agencies. The Company believes these issuers to present little credit risk. The Company ~~does not consider~~considers these securities ~~to be~~are not other-than-temporarily impaired because the decline in fair value is attributable to changes in interest rates and investment securities markets, generally, and not credit quality. The Company does not intend to sell these debt securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

Unrealized losses on corporate debt securities ~~at June 30, 2019, and municipal and corporate debt securities at December 31, 2018,~~ are attributable to changes in interest rates and investment securities markets, generally, and as a result, temporary in nature. The Company ~~does not consider~~considers these securities ~~to be~~are not other-than-temporarily impaired because the issuers of these debt securities are considered to be high quality, and ~~management~~generally present little credit risk. The Company does not intend to sell these investments and it is more likely than not that it will not be required to sell these investments before their anticipated recovery.

~~Amortized cost and approximate fair values of securities held to maturity, are summarized as follows:~~

June 30, 2019
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
Securities Held to Maturity -
U.S. government sponsored enterprise debt securities $ 78,448
$ 497
$ (382 ) $ 78,563
U.S. Government agency debt securities 2,792
54
—
2,846
$ 81,240
$ 551
$ (382 ) $ 81,409

December 31, 2018
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
Securities Held to Maturity -
U.S. government sponsored enterprise debt securities $ 82,326
$ —
$ (3,889 ) $ 78,437
U.S. Government agency debt securities 2,862
—
(49 ) 2,813
$ 85,188
$ —
$ (3,938 ) $ 81,250

Contractual maturities of debt securities at June 30, ~~2019~~2020 are as follows:



	Available for Sale				Held to Maturity
(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within 1 year	$	78,742	$	79,080	$	—	$	—
After 1 year through 5 years	173,554		178,179		—		—
After 5 years through 10 years	306,852		322,314		11,515		12,020
After 10 years	919,701		940,211		54,101		55,064
	$	1,478,849	$	1,519,784	$	65,616	$	67,084

Available for Sale Held to Maturity
(in thousands) Amortized
Cost Estimated
Fair Value Amortized
Cost Estimated
Fair Value
Within 1 year $ 44,267
$ 44,283
$ —
$ —
After 1 year through 5 years 217,122
218,528
—
—
After 5 years through 10 years 175,701
179,155
—
—
After 10 years 1,033,513
1,035,477
81,240
81,409
No contractual maturities 24,269
23,779
—
—
$ 1,494,872
$ 1,501,222
$ 81,240
$ 81,409
Equity securities with readily available fair value not held for trading consist of mutual funds with an original cost of $24.0 million, and fair value of $24.4 million and $23.8 million as of June 30, 2020 and December 31, 2019, respectively. These equity securities have no stated maturities. During the three and six month periods ended June 30, 2020, the Company recognized unrealized gains of $0.2 million and $0.6 million, respectively, related to the change in fair value of these mutual funds. NaN gain was recognized during the three and six month periods ended June 30, 2019.


4.	Loans

The loan portfolio consists of the following loan classes:



(in thousands)	June 30, 2020		December 31, 2019
Real estate loans
Commercial real estate
Non-owner occupied	$	1,841,075	$	1,891,802
Multi-family residential	823,450		801,626
Land development and construction loans	284,766		278,688
	2,949,291		2,972,116
Single-family residential	589,713		539,102
Owner occupied	938,511		894,060
	4,477,515		4,405,278
Commercial loans	1,247,455		1,234,043
Loans to financial institutions and acceptances	16,597		16,552
Consumer loans and overdrafts	130,704		88,466
	$	5,872,271	$	5,744,339

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


3.	~~Loans~~

~~The loan portfolio consists~~At June 30, 2020 and December 31, 2019, loans with an outstanding principal balance of $1.5 billion and $1.6 billion, respectively, were pledged as collateral to secure advances from the ~~following loan classes:~~

(in thousands) June 30,
2019 December 31,
2018
Real estate loans
Commercial real estate
Nonowner occupied $ 1,872,493
$ 1,809,356
Multi-family residential 968,080
909,439
Land development and construction loans 291,304
326,644
3,131,877
3,045,439
Single-family residential 535,563
533,481
Owner occupied 836,334
777,022
4,503,774
4,355,942
Commercial loans 1,180,736
1,380,428
Loans to financial institutions and acceptances 25,006
68,965
Consumer loans and overdrafts 103,239
114,840
$ 5,812,755
$ 5,920,175
FHLB.

The amounts above include loans under syndication facilities of approximately ~~$609~~$477 million and ~~$807~~$562 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, which include Shared National Credit facilities and agreements to enter into credit agreements ~~among~~with other lenders (club deals), and other agreements.

The following tables summarize international loans by country, net of loans fully collateralized with cash of approximately ~~$20.6~~$11.9 million and ~~$19.5~~$15.2 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.


	June 30, 2019						June 30, 2020						December 31, 2019
(in thousands)	Venezuela		Others (1)		Total		Venezuela		Others (1)		Total		Venezuela		Others (1)		Total
Real estate loans
Single-family residential (2)	$	116,218	$	6,636	$	122,854	$	93,409	$	9,771	$	103,180	$	103,979	$	7,692	$	111,671
Commercial loans	—		57,374		57,374		—		45,029		45,029		—		43,850		43,850
Loans to financial institutions and acceptances	—		5,000		5,000		—		10		10		—		5		5
Consumer loans and overdrafts ~~(3)~~(4)	21,197		8,368		29,565		361		7,585		7,946		8,318		7,593		15,911
	$	137,415	$	77,378	$	214,793	$	93,770	$	62,395	$	156,165	$	112,297	$	59,140	$	171,437

__________________


(1)	Loans to borrowers in 1512 other countries which do not individually exceed 1% of total ~~assets.~~assets (14 countries at December 31, 2019).


(2)	Corresponds to mortgage loans secured by single-family residential properties located in the U.S.

(3)

~~Mostly~~

At December 31, 2019, Venezuela balances are mostly comprised of credit card extensions of credit to customers with deposits with the Bank. ~~In April 2019, the~~The Company ~~revised~~phased out its legacy credit card ~~program~~products to further strengthen its credit quality. ~~The Company stopped~~During the ~~charging privileges~~first quarter of ~~its smallest and riskiest cardholders and required repayment~~2020, the remaining balances related to the credit card product were repaid, therefore, there are 0 outstanding credit card balances as of ~~their balances by November 2019. Other cardholders’ charging privileges will end in October 2019 and they will be required to repay all balances by January~~June 30, 2020.


(4)	Overdrafts to customers outside the United States were de minimis at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

The age analysis of the loan portfolio by class, including nonaccrual loans, as of June 30, 2020 and December 31, 2019 are summarized in the following tables:

1516

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

December 31, 2018
(in thousands) Venezuela Others (1) Total
Real estate loans
Single-family residential (2) $ 128,971
$ 6,467
$ 135,438
Commercial loans —
73,636
73,636
Loans to financial institutions and acceptances —
49,000
49,000
Consumer loans and overdrafts (3) 28,191
13,494
41,685
$ 157,162
$ 142,597
$ 299,759

~~__________________~~


~~(1)~~	~~Loans to borrowers in 17 other countries which do not individually exceed 1% of total assets.~~


~~(2)~~	~~Corresponds to mortgage loans secured by single-family residential properties located in the U.S.~~


~~(3)~~	Mostly comprised of credit card extensions of credit to customers with deposits with the Bank. Charging privileges for Venezuela resident card holders are suspended when the cardholders’ average deposits decline below the outstanding credit balance. At the beginning of 2018, the Company changed the monitoring of such balances from quarterly to monthly.

~~The age analysis of the loan portfolio by class, including nonaccrual loans, as of~~ ~~June 30, 2019~~ ~~and December 31, 2018 are summarized in the following tables:~~

June 30, 2019
Total Loans,
Net of
Unearned
Income Past Due Total Loans in
Nonaccrual
Status Total Loans
90 Days or More
Past Due
and Accruing
(in thousands) Current 30-59
Days 60-89
Days Greater than
90 Days Total Past
Due
Real estate loans
Commercial real estate
Nonowner occupied $ 1,872,493
$ 1,870,529
$ 1,964
$ —
$ —
$ 1,964
$ 1,964
$ —
Multi-family residential 968,080
967,423
—
—
657
657
657
—
Land development and construction loans 291,304
291,304
—
—
—
—
—
—
3,131,877
3,129,256
1,964
—
657
2,621
2,621
—
Single-family residential 535,563
528,921
916
1,573
4,153
6,642
9,432
—
Owner occupied 836,334
832,924
2,715
—
695
3,410
10,528
—
4,503,774
4,491,101
5,595
1,573
5,505
12,673
22,581
—
Commercial loans 1,180,736
1,176,688
872
80
3,096
4,048
10,032
—
Loans to financial institutions and acceptances 25,006
25,006
—
—
—
—
—
—
Consumer loans and overdrafts 103,239
102,464
419
250
106
775
114
23
$ 5,812,755
$ 5,795,259
$ 6,886
$ 1,903
$ 8,707
$ 17,496
$ 32,727
$ 23



	June 30, 2020
	Total Loans, Net of Unearned Income				Past Due								Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing
(in thousands)	Total Loans, Net of Unearned Income		Current		30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing
Real estate loans
Commercial real estate
Non-owner occupied	$	1,841,075	$	1,834,585	$	6,490	$	—	$	—	$	6,490	$	8,426	$	—
Multi-family residential	823,450		823,450		—		—		—		—		—		—
Land development and construction loans	284,766		284,766		—		—		—		—		—		—
	2,949,291		2,942,801		6,490		—		—		6,490		8,426		—
Single-family residential	589,713		584,115		38		940		4,620		5,598		7,975		—
Owner occupied	938,511		934,271		502		47		3,691		4,240		11,828		—
	4,477,515		4,461,187		7,030		987		8,311		16,328		28,229		—
Commercial loans	1,247,455		1,239,173		815		3,198		4,269		8,282		48,961		—
Loans to financial institutions and acceptances	16,597		16,597		—		—		—		—		—		—
Consumer loans and overdrafts	130,704		130,611		23		12		58		93		70		—
	$	5,872,271	$	5,847,568	$	7,868	$	4,197	$	12,638	$	24,703	$	77,260	$	—



	December 31, 2019
	Total Loans, Net of Unearned Income				Past Due								Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing
(in thousands)	Total Loans, Net of Unearned Income		Current		30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing
Real estate loans
Commercial real estate
Non-owner occupied	$	1,891,802	$	1,891,801	$	1	$	—	$	—	$	1	$	1,936	$	—
Multi-family residential	801,626		801,626		—		—		—		—		—		—
Land development and construction loans	278,688		278,688		—		—		—		—		—		—
	2,972,116		2,972,115		1		—		—		1		1,936		—
Single-family residential	539,102		530,399		4,585		1,248		2,870		8,703		7,291		—
Owner occupied	894,060		888,158		1,360		1,724		2,818		5,902		14,130		—
	4,405,278		4,390,672		5,946		2,972		5,688		14,606		23,357		—
Commercial loans	1,234,043		1,226,320		4,418		608		2,697		7,723		9,149		—
Loans to financial institutions and acceptances	16,552		16,552		—		—		—		—		—		—
Consumer loans and overdrafts	88,466		88,030		215		176		45		436		416		5
	$	5,744,339	$	5,721,574	$	10,579	$	3,756	$	8,430	$	22,765	$	32,922	$	5

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

December 31, 2018
Total Loans,
Net of
Unearned
Income Past Due Total Loans in
Nonaccrual
Status Total Loans
90 Days or More
Past Due
and Accruing
(in thousands) Current 30-59
Days 60-89
Days Greater than
90 Days Total Past
Due
Real estate loans
Commercial real estate
Nonowner occupied $ 1,809,356
$ 1,809,356
$ —
$ —
$ —
$ —
$ —
$ —
Multi-family residential 909,439
909,439
—
—
—
—
—
—
Land development and construction loans 326,644
326,644
—
—
—
—
—
—
3,045,439
3,045,439
—
—
—
—
—
—
Single-family residential 533,481
519,730
7,910
2,336
3,505
13,751
6,689
419
Owner occupied 777,022
773,876
2,800
160
186
3,146
4,983
—
4,355,942
4,339,045
10,710
2,496
3,691
16,897
11,672
419
Commercial loans 1,380,428
1,378,022
704
1,062
640
2,406
4,772
—
Loans to financial institutions and acceptances 68,965
68,965
—
—
—
—
—
—
Consumer loans and overdrafts 114,840
113,227
474
243
896
1,613
35
884
$ 5,920,175
$ 5,899,259
$ 11,888
$ 3,801
$ 5,227
$ 20,916
$ 16,479
$ 1,303

~~At June 30, 2019 and December 31, 2018, loans with an outstanding principal balance of $1.7 billion were pledged as collateral to secure advances from the FHLB.~~


4.5.	Allowance for Loan Losses

The analyses by loan segment of the changes in the allowance for loan losses for the three and six month periods ended June 30, ~~2019~~2020 and ~~2018,~~2019, and its allocation by impairment methodology and the related investment in loans, net as of June 30, ~~2019~~2020 and ~~2018~~2019 are summarized in the following tables:


	Three Months Ended June 30, 2019															Three Months Ended June 30, 2020
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total			Real Estate		Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	22,456		$	29,100		$	106		$	8,660		$	60,322		$	36,430	$	29,062		$	42		$	7,414		$	72,948
(Reversal of) provision for loan losses	(556		)	(2,646		)	(46		)	1,898			(1,350		)
Provision for loan losses																18,068		30,542			(42		)	52			48,620
Loans charged-off
Domestic	—			(874		)	—			(210		)	(1,084		)	—		(2,075		)	—			(44		)	(2,119		)
International	—			(43		)	—			(894		)	(937		)	—		—			—			(7		)	(7		)
Recoveries	—			287			—			166			453			—		50			—			160			210
Balances at end of the period	$	21,900		$	25,824		$	60		$	9,620		$	57,404		$	54,498	$	57,579		$	—		$	7,575		$	119,652



	Six Months Ended June 30, 2020
(in thousands)	Real Estate		Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	25,040	$	22,482		$	42		$	4,659		$	52,223
Provision for loan losses	29,458		38,072			(42		)	3,132			70,620
Loans charged-off
Domestic	—		(3,176		)	—			(266		)	(3,442		)
International	—		(34		)	—			(258		)	(292		)
Recoveries	—		235			—			308			543
Balances at end of the period	$	54,498	$	57,579		$	—		$	7,575		$	119,652

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)



	June 30, 2020
(in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and Others		Total
Allowance for loan losses by impairment methodology:
Individually evaluated	$	2,565	$	23,640	$	—	$	1,499	$	27,704
Collectively evaluated	51,933		33,939		—		6,076		91,948
	$	54,498	$	57,579	$	—	$	7,575	$	119,652
Investment in loans, net of unearned income:
Individually evaluated	$	8,426	$	61,101	$	—	$	8,022	$	77,549
Collectively evaluated	2,918,353		2,270,212		16,597		589,560		5,794,722
	$	2,926,779	$	2,331,313	$	16,597	$	597,582	$	5,872,271



	Three Months Ended June 30, 2019
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	22,456		$	29,100		$	106		$	8,660		$	60,322
(Reversal of) provision for loan losses	(556		)	(2,646		)	(46		)	1,898			(1,350		)
Loans charged-off
Domestic	—			(874		)	—			(210		)	(1,084		)
International	—			(43		)	—			(894		)	(937		)
Recoveries	—			287			—			166			453
Balances at end of the period	$	21,900		$	25,824		$	60		$	9,620		$	57,404



	Six Months Ended June 30, 2019
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	22,778		$	30,018		$	445		$	8,521		$	61,762
(Reversal of) provision for loan losses	(878		)	(2,677		)	(385		)	2,590			(1,350		)
Loans charged-off
Domestic	—			(1,866		)	—			(406		)	(2,272		)
International	—			(61		)	—			(1,300		)	(1,361		)
Recoveries	—			410			—			215			625
Balances at end of the period	$	21,900		$	25,824		$	60		$	9,620		$	57,404

June 30, 2019
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Allowance for loan losses by impairment methodology
Individually evaluated $ 527
$ 2,608
$ —
$ 1,390
$ 4,525
Collectively evaluated 21,373
23,216
60
8,230
52,879
$ 21,900
$ 25,824
$ 60
$ 9,620
$ 57,404
Investment in loans, net of unearned income
Individually evaluated $ 2,621
$ 19,298
$ —
$ 6,633
$ 28,552
Collectively evaluated 3,123,437
2,104,143
25,006
531,617
5,784,203
$ 3,126,058
$ 2,123,441
$ 25,006
$ 538,250
$ 5,812,755

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)



	June 30, 2019
(in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and Others		Total
Allowance for loan losses by impairment methodology
Individually evaluated	$	527	$	2,608	$	—	$	1,390	$	4,525
Collectively evaluated	21,373		23,216		60		8,230		52,879
	$	21,900	$	25,824	$	60	$	9,620	$	57,404
Investment in loans, net of unearned income
Individually evaluated	$	2,621	$	19,298	$	—	$	6,633	$	28,552
Collectively evaluated	3,123,437		2,104,143		25,006		531,617		5,784,203
	$	3,126,058	$	2,123,441	$	25,006	$	538,250	$	5,812,755

Three Months Ended June 30, 2018
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Balances at beginning of the period $ 30,503
$ 33,672
$ 3,671
$ 4,272
$ 72,118
(Reversal of) provision for loan losses (1,814 ) (1,750 ) (354 ) 4,068
150
Loans charged-off
Domestic —
(2,355 ) —
(98 ) (2,453 )
International —
(52 ) —
(230 ) (282 )
Recoveries 4
269
—
125
398
Balances at end of the period $ 28,693
$ 29,784
$ 3,317
$ 8,137
$ 69,931

Six Months Ended June 30, 2018
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Balances at beginning of the period 31,290
32,687
4,362
3,661
72,000
(Reversal of) provision for loan losses (2,635 ) (1,215 ) (1,045 ) 5,045
150
Loans charged-off
Domestic —
(2,737 ) —
(117 ) (2,854 )
International —
(52 ) —
(630 ) (682 )
Recoveries 38
1,101
—
178
1,317
Balances at end of the period 28,693
29,784
3,317
8,137
69,931

June 30, 2018
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Allowance for loan losses by impairment methodology
Individually evaluated $ 4,055
$ 2,252
$ —
$ —
$ 6,307
Collectively evaluated 24,638
27,532
3,317
8,137
63,624
$ 28,693
$ 29,784
$ 3,317
$ 8,137
$ 69,931
Investment in loans, net of unearned income
Individually evaluated $ 11,078
$ 16,206
$ —
$ 306
$ 27,590
Collectively evaluated 3,078,004
2,184,226
371,498
558,231
6,191,959
$ 3,089,082
$ 2,200,432
$ 371,498
$ 558,537
$ 6,219,549

~~Table of Contents~~

~~Amerant Bancorp Inc. and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

The following is a summary of the recorded investment amount of loan sales by portfolio segment:



Three Months Ended June 30, (in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and others		Total
2020	$	—	$	—	$	—	$	2,126	$	2,126
2019	$	—	$	59,282	$	—	$	2,957	$	62,239

Three Months Ended June 30,
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and others Total
2019 $ —
$ 59,282
$ —
$ 2,957
$ 62,239
2018 $ 5,049
$ 5,774
$ —
$ —
$ 10,823



Six Months Ended June 30, (in thousands)	Real Estate		Commercial		Financial Institutions			Consumer and others		Total
2020	$	—	$	11,901	$	—	1,864	$	3,334	$	15,235
2019	$	23,475	$	186,120	$	—	1,864,000	$	4,821	$	214,416

Six Months Ended June 30,
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and others Total
2019 23,475
186,120
—
4,821
214,416
2018 8,007
15,774
—
1,864
—
23,781

~~The following is a summary of impaired loans as of June 30, 2019 and December 31, 2018~~

June 30, 2019
Recorded Investment
(in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average (1) Total Unpaid Principal Balance Valuation Allowance
Real estate loans
Commercial real estate
Nonowner occupied $ 1,964
$ —
$ 1,964
$ 3,052
$ 1,964
$ 313
Multi-family residential 657
—
657
702
657
214
Land development and construction
loans —
—
—
—
—
—
2,621
—
2,621
3,754
2,621
527
Single-family residential 6,377
484
6,861
4,697
6,950
1,444
Owner occupied 3,223
6,427
9,650
5,980
9,688
1,056
12,221
6,911
19,132
14,431
19,259
3,027
Commercial loans 9,235
92
9,327
6,987
10,477
1,448
Consumer loans and overdrafts 84
9
93
39
90
50
$ 21,540
$ 7,012
$ 28,552
$ 21,457
$ 29,826
$ 4,525

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

The following is a summary of impaired loans as of June 30, 2020 and December 31, 2019:


	December 31, 2018												June 30, 2020
	Recorded Investment												Recorded Investment
(in thousands)	With a Valuation Allowance		Without a Valuation Allowance		Total		Year Average (1)		Total Unpaid Principal Balance		Valuation Allowance		With a Valuation Allowance		Without a Valuation Allowance		Total		Year Average (1)		Total Unpaid Principal Balance		Valuation Allowance
Real estate loans
Commercial real estate
Nonowner occupied	$	—	$	—	$	—	$	7,935	$	—	$	—
Non-owner occupied													$	8,426	$	—	$	8,426	$	3,559	$	8,434	$	2,565
Multi-family residential	—		717		717		724		722		—		—		—		—		—		—		—
Land development and construction loans	—		—		—		—		—		—		—		—		—		—		—		—
	—		717		717		8,659		722		—		8,426		—		8,426		3,559		8,434		2,565
Single-family residential	3,086		306		3,392		4,046		3,427		1,235		5,596		2,645		8,241		6,816		8,381		1,469
Owner occupied	169		4,427		4,596		5,524		4,601		75		1,525		10,350		11,875		12,413		11,716		522
	3,255		5,450		8,705		18,229		8,750		1,310		15,547		12,995		28,542		22,788		28,531		4,556
Commercial loans	4,585		148		4,733		7,464		6,009		1,059		47,088		1,849		48,937		19,130		51,617		23,118
Consumer loans and overdrafts	9		11		20		15		17		4		61		9		70		264		63		30
	$	7,849	$	5,609	$	13,458	$	25,708	$	14,776	$	2,373	$	62,696	$	14,853	$	77,549	$	42,182	$	80,211	$	27,704

_______________


(1)	Average using trailing four quarter balances.

~~The Company recognized interest income on impaired loans~~



	December 31, 2019
	Recorded Investment
(in thousands)	With a Valuation Allowance		Without a Valuation Allowance		Total		Year Average (1)		Total Unpaid Principal Balance		Valuation Allowance
Real estate loans
Commercial real estate
Non-owner occupied	$	1,936	$	—	$	1,936	$	1,459	$	1,936	$	1,161
Multi-family residential	—		—		—		342		—		—
Land development and construction loans	—		—		—		—		—		—
	1,936		—		1,936		1,801		1,936		1,161
Single-family residential	4,739		729		5,468		5,564		5,598		946
Owner occupied	6,169		7,906		14,075		9,548		13,974		501
	12,844		8,635		21,479		16,913		21,508		2,608
Commercial loans	8,415		13		8,428		8,552		8,476		1,288
Consumer loans and overdrafts	395		9		404		153		402		378
	$	21,654	$	8,657	$	30,311	$	25,618	$	30,386	$	4,274

_______________


(1)	Average using trailing four quarter balances.

Table of ~~$14 thousand~~Contents

Amerant Bancorp Inc. and ~~$83 thousand during the three months ended June 30, 2019 and~~ ~~2018, respectively, and $32 thousand and $108 thousand during the six months ended June 30, 2019 and~~ ~~2018, respectively.~~Subsidiaries

~~During the six months ended June 30, 2019,~~Notes to Interim Consolidated Financial Statements (Unaudited)

There were no new loan modifications considered troubled debt restructurings (“TDRs”) ~~consisted of one single-family residential loan with a recorded investment of $202 thousand as~~during the three and six months periods ended June 30, 2020. As of June 30, ~~2019. During the six months ended June 30, 2019, the Company had no charge-offs against the allowance for loan losses as a result~~2020, TDRs mainly consist of ~~TDR loans. Since June 30, 2018, no TDRs subsequently defaulted under the modified terms of the loan agreement.~~

~~On July 30, 2019, the Company agreed to restructure certain CRE, owner occupied and commercial loans totaling $9.4 million in~~ a multiple loan relationship with a South Florida ~~customer.~~customer including CRE, owner occupied and commercial loans totaling $7.3 million. This TDR ~~restructure~~ consisted of extending repayment terms and adjusting future periodic payments ~~and the Company determined~~which resulted in no additional ~~impairment charges were necessary. Four~~reserves at the time of its modification. NaN residential loans, totaling ~~$2.2~~$2.1 million at June 30, 2020, which are included in this loan relationship, were not modified. The Company believes the specific reserves associated with ~~these CRE, owner occupied, commercial loans, and residential loans,~~this loan relationship, which total ~~a $11.6~~$1.4 million ~~impaired loan relationship as of~~at June 30, ~~2019,~~2020, are adequate to cover probable losses given current facts and circumstances. In the fourth quarter of 2019, this $7.3 million TDR loan relationship did not perform in accordance with the restructured terms. The Company ~~will continue~~continues to closely monitor the performance of these loans under their modified terms. Since June 30, 2019, 0 additional TDRs subsequently defaulted under their modified terms. In addition, during the first half of 2020, the company charged off $1.9 million against the allowance for loan losses associated with TDR loans.

On March 26, 2020, the Company began offering loan payment relief options to customers impacted by the COVID-19 pandemic, including interest-only and/or forbearance options. These programs continued in the second quarter of 2020. Consistent with accounting and regulatory guidance, temporary modifications granted under these programs are not considered TDRs. Loans which have been modified under these programs totaled $1.1 billion as of June 30, 2020. As of this date, loans in these programs on which the interest-only and/or forbearance period expired totaled $504.7 million, or 45.4% of total modified loans. The Company collected payments due on $8.4 million of modified loans through June 30, 2020. Modified loans totaling $496.3 million are due by July 31, 2020.

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Notes to Interim Consolidated Financial Statements (Unaudited)

Loans by Credit ~~Risk~~ Quality Indicators

~~The Company’s investment in loans~~Loans by credit quality indicators as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are summarized in the following tables:


	June 30, 2019												June 30, 2020
	Credit Risk Rating												Credit Risk Rating
	Nonclassified				Classified								Nonclassified				Classified
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate loans
Commercial real estate
Nonowner occupied	$	1,864,278	$	6,251	$	1,964	$	—	$	—	$	1,872,493
Non-owner occupied													$	1,829,770	$	2,127	$	7,242	$	1,936	$	—	$	1,841,075
Multi-family residential	967,423				657		—		—		968,080		823,450		—		—		—		—		823,450
Land development and construction loans	291,304		—		—		—		—		291,304		277,570		7,196		—		—		—		284,766
	3,123,005		6,251		2,621		—		—		3,131,877		2,930,790		9,323		7,242		1,936		—		2,949,291
Single-family residential	526,131		—		9,432		—		—		535,563		581,586		—		8,127		—		—		589,713
Owner occupied	812,918		9,476		13,940		—		—		836,334		916,485		7,884		14,142		—		—		938,511
	4,462,054		15,727		25,993		—		—		4,503,774		4,428,861		17,207		29,511		1,936		—		4,477,515
Commercial loans	1,163,375		5,332		11,490		539		—		1,180,736		1,185,758		5,664		35,211		20,822		—		1,247,455
Loans to financial institutions and acceptances	25,006		—		—		—		—		25,006		16,597		—		—		—		—		16,597
Consumer loans and overdrafts	98,818		—		4,421		—		—		103,239		130,623		—		81		—		—		130,704
	$	5,749,253	$	21,059	$	41,904	$	539	$	—	$	5,812,755	$	5,761,839	$	22,871	$	64,803	$	22,758	$	—	$	5,872,271

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Notes to Interim Consolidated Financial Statements (Unaudited)



	December 31, 2019
	Credit Risk Rating
	Nonclassified				Classified
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate loans
Commercial real estate
Non-owner occupied	$	1,879,780	$	9,324	$	762	$	1,936	$	—	$	1,891,802
Multi-family residential	801,626		—		—		—		—		801,626
Land development and construction loans	268,733		9,955		—		—		—		278,688
	2,950,139		19,279		762		1,936		—		2,972,116
Single-family residential	531,811		—		7,291		—		—		539,102
Owner occupied	871,682		8,138		14,240		—		—		894,060
	4,353,632		27,417		22,293		1,936		—		4,405,278
Commercial loans	1,217,399		5,569		8,406		2,669		—		1,234,043
Loans to financial institutions and acceptances	16,552		—		—		—		—		16,552
Consumer loans and overdrafts	88,042		—		67		357		—		88,466
	$	5,675,625	$	32,986	$	30,766	$	4,962	$	—	$	5,744,339

December 31, 2018
Credit Risk Rating
Nonclassified
Classified
(in thousands) Pass Special Mention Substandard Doubtful Loss Total
Real estate loans
Commercial real estate
Nonowner occupied $ 1,802,573
$ 6,561
$ 222
$ —
$ —
$ 1,809,356
Multi-family residential 909,439
—
—
—
—
909,439
Land development and construction loans 326,644
—
—
—
—
326,644
3,038,656
6,561
222
—
—
3,045,439
Single-family residential 526,373
—
7,108
—
—
533,481
Owner occupied 758,552
9,019
9,451
—
—
777,022
4,323,581
15,580
16,781
—
—
4,355,942
Commercial loans 1,369,434
3,943
6,462
589
—
1,380,428
Loans to financial institutions and acceptances 68,965
—
—
—
—
68,965
Consumer loans and overdrafts 108,778
—
6,062
—
—
114,840
$ 5,870,758
$ 19,523
$ 29,305
$ 589
$ —
$ 5,920,175


5.6.	Time Deposits

Time deposits in denominations of $100,000 or more amounted to approximately $1.5 billion and $1.4 billion at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019, respectively. Time deposits in denominations of more than $250,000 ~~or more~~ amounted to approximately ~~$740~~$784 million and ~~$718~~$733 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, brokered time deposits amounted to ~~$619~~$588 million and ~~$642~~$662 million, respectively.


6.7.	Advances from the Federal Home Loan Bank and Other Borrowings

~~The~~At June 30, 2020 and December 31, 2019, the Company had outstanding advances from the FHLB and other ~~borrowings. These~~ borrowings ~~bear fixed interest rates or variable rates based on 3-month LIBOR~~ as follows:


								Outstanding Balance
Year of Maturity	Interest Rate	June 30, 2019		December 31, 2018		Interest Rate	Interest Rate Type	At June 30, 2020		At December 31, 2019
(in thousands, except percentages)
2019	1.80% to 3.86%	$	350,000	$	440,000
								(in thousands)
2020						0.44% to 2.35%	Fixed	—		135,000
2020	1.50% to 2.74%	325,000		306,000		1.73% to 2.03%	Variable	—		150,000
2021	1.93% to 3.08%	240,000		210,000		1.75% to 3.08%	Fixed	—		210,000
2022	2.48% to 2.80%	120,000		120,000		0.65% to 2.80%	Fixed	50,000		120,000
2023 and after	2.95% to 3.23%	90,000		90,000
2023 and after (1)						0.62% to 3.23%	Fixed	1,000,000		620,000
		$	1,125,000	$	1,166,000			$	1,050,000	$	1,235,000

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Notes to Interim Consolidated Financial Statements (Unaudited)

_______________


7.(1)	~~Derivative Instruments~~As of June 30, 2020 and December 31, 2019, includes $530 million (fixed interest rates raging from 0.62% to 0.97%) in advances from the FHLB that are callable prior to maturity.

In early April 2020, the Company restructured $420.0 million of its fixed-rate FHLB advances extending their original maturities from 2021 to 2023 at lower interest rates. The Company incurred a loss of $17.0 million as a result of this restructuring which was blended into the new interest rates of these advances affecting the yields through their remaining maturities. The Company accounted for these transactions as the modification of existing debt in accordance with U.S. GAAP.

8.Senior Notes

On June 23, 2020, the Company completed a $60.0 million offering of senior notes with a coupon rate of 5.75% and due 2025 (the “Senior Notes”). The net proceeds, after direct issuance costs of $1.6 million, totaled $58.4 million. The Senior Notes are presented net of direct issuance costs in the consolidated financial statements. These costs have been deferred and are being amortized over the term of the Senior Notes of 5 years as an adjustment to yield. These Senior Notes are unsecured and unsubordinated, rank equally with all of our existing and future unsecured and unsubordinated indebtedness, and are fully and unconditionally guaranteed by our wholly-owned intermediate holding company subsidiary Amerant Florida Bancorp.

9. Junior Subordinated Debentures Held by Trust Subsidiaries

The following table provides information on the outstanding Trust Preferred Securities issued by, and the junior subordinated debentures issued to, each of the statutory trust subsidiaries as of June 30, ~~2019~~2020 and December 31, ~~2018, the fair values of the Company’s derivative instruments were as follows:~~2019:



	June 30, 2020				December 31, 2019
(in thousands)	Amount of Trust Preferred Securities Issued by Trust		Principal Amount of Debenture Issued to Trust		Amount of Trust Preferred Securities Issued by Trust		Principal Amount of Debenture Issued to Trust		Year of Issuance	Annual Rate of Trust Preferred Securities and Debentures	Year of Maturity
Commercebank Capital Trust I	$	—	$	—	$	26,830	$	28,068	1998	8.90%	2028
Commercebank Capital Trust VI	9,250		9,537		9,250		9,537		2002	3-M LIBOR + 3.35%	2033
Commercebank Capital Trust VII	8,000		8,248		8,000		8,248		2003	3-M LIBOR + 3.25%	2033
Commercebank Capital Trust VIII	5,000		5,155		5,000		5,155		2004	3-M LIBOR + 2.85%	2034
Commercebank Capital Trust IX	25,000		25,774		25,000		25,774		2006	3-M LIBOR + 1.75%	2038
Commercebank Capital Trust X	15,000		15,464		15,000		15,464		2006	3-M LIBOR + 1.78%	2036
	$	62,250	$	64,178	$	89,080	$	92,246

June 30, 2019 December 31, 2018
(in thousands) Other Assets Other Liabilities Other Assets Other Liabilities
Interest rate swaps designated as cash flow hedges $ —
$ —
$ 9,386
$ 283
Interest rate swaps not designated as hedging instruments:
Customers 10,226
—
1,420
—
Third party broker —
10,226
—
1,420
10,226
10,226
1,420
1,420
Interest rate caps not designated as hedging instruments:
Customers —
78
—
685
Third party broker 78
—
685
—
78
78
685
685
$ 10,304
$ 10,304
$ 11,491
$ 2,388

~~Derivatives Designated as Hedging Instruments~~

~~At December 31, 2018,~~On January 30, 2020, the Company ~~had 16 interest rate swap contracts with total notional amounts~~redeemed all $26.8 million of ~~$280 million, that were designated as cash flow hedges~~its outstanding 8.90% trust preferred capital securities issued by Commercebank Capital Trust I (“Capital Trust I”) at a redemption price of floating rate interest payments on the outstanding and expected rollover of variable-rate advances from the FHLB. These hedge relationships were expected to be highly effective in offsetting the effects of changes in interest rates in the cash flows associated with the advances from the FHLB. No hedge ineffectiveness gains or losses were recognized in the six months ended June 30, 2019 and 2018.

~~In February and March 2019, the Company terminated these 16 interest rate swaps designated as cash flow hedges.~~100%. The Company will recognize the contracts’ cumulative net unrealized gains of $8.9 million in earnings over the remaining original life of the terminated interest rate swaps of between six months and seven years.

On August 8, 2019, the Company entered into five interest rate swap contracts with notional amounts totaling $64.2 million that were designated as cash flow hedges to manage exposure of floating rate interest payments onsimultaneously redeemed all ~~of the Company’s outstanding variable-rate~~ junior subordinated debentures with carrying amounts at June 30, 2019 totaling $64.2 million. These interest rate swap contracts mature in approximately three years. The Company expects these interest rates swaps to be highly effective in offsetting the effectsheld by Capital Trust I as part of ~~changes in interest rates on~~this redemption transaction. This redemption reduced total cash ~~flows associated with the Company’s variable-rate junior subordinated debentures.~~and cash equivalents by $27.1 million, financial liabilities by

The Company’s interest rate swaps designated as cash flow hedges involve the Company’s payment of fixed-rate amounts in exchange for the Company receiving variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

~~Derivatives Not Designated as Hedging Instruments~~

At June 30, 2019 and December 31, 2018, the Company had 22 and eight interest rate swap contracts with customers, respectively, with a total notional amount of $199.1 million and $80.4 million, respectively. These instruments involve the payment of fixed-rate amounts in exchange for the Company receiving variable-rate payments over the life of the contract. In addition, at June 30, 2019 and December 31, 2018, the Company had interest rate swap mirror contracts with a third party broker with similar terms.

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Notes to Interim Consolidated Financial Statements (Unaudited)

$28.1 million, other assets by $3.4 million, and other liabilities by $2.2 million during the three months ended March 31, 2020. In addition, the Company recorded a charge of $0.3 million during the same period for the unamortized issuance costs. This redemption reduced the Company’s Tier 1 equity capital by a net amount of $24.7 million.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


10.	Derivative Instruments

At June 30, 2020 and December 31, 2019, the fair values of the Company’s derivative instruments were as follows:



	June 30, 2020				December 31, 2019
(in thousands)	Other Assets		Other Liabilities		Other Assets		Other Liabilities
Interest rate swaps designated as cash flow hedges	$	79	$	2,005	$	301	$	—
Interest rate swaps not designated as hedging instruments:
Customers	47,116		—		11,236		527
Third party broker	—		47,116		527		11,236
	47,116		47,116		11,763		11,763
Interest rate caps not designated as hedging instruments:
Customers	—		57		—		46
Third party broker	16		—		33		—
	16		57		33		46
	$	47,211	$	49,178	$	12,097	$	11,809

NaN hedge ineffectiveness gains or losses were recognized on derivatives designated as hedging instruments in the three and six month periods ended June 30, 2020 and 2019.

Derivatives Not Designated as Hedging Instruments

Interest Rate Swaps

At ~~each~~June 30, 2020 and December 31, 2019, the Company had 67 and 49 interest rate swap contracts with customers, respectively, with a total notional amount of $456.9 million and $405.2 million, respectively. These instruments involve the payment of variable-rate amounts in exchange for the Company receiving fixed-rate amounts over the life of the contract. In addition, at June 30, 2020 and December 31, 2019, the Company had 67 and 49 interest rate swap mirror contracts, respectively, with third party brokers with similar terms.

In 2019, the Company entered into swap participation agreements with other financial institutions to manage the credit risk exposure on certain interest rate swaps with customers. Under these agreements, the Company, as the beneficiary or guarantor, will receive or make payments from/to the counterparty if the borrower defaults on the related interest rate swap contract. As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had 2 and 3 swap participation agreements, respectively, with total notional amounts of approximately $32.0 million and $50.2 million, respectively. The notional amount of these agreements is based on the Company’s pro-rata share of the related interest rate swap contracts. As of June 30, 2020 and December 31, 2019, the fair value of swap participation agreements was not significant.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

Interest Rate Caps

At June 30, 2020 and December 31, 2019, the Company had 18 and 16 interest rate cap contracts with customers with a total notional amount of ~~$302.8~~$360.5 million and ~~$323.7~~$315.2 million, respectively. These instruments involve the Company making payments if an interest rate exceeds the agreed strike price. In addition, at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had 11 and 13 interest rate cap mirror contracts, respectively, with various third party brokers with ~~similar terms.~~total notional amounts of $184.4 million and $234.1 million, respectively.


8.11.	Stock-based Incentive Compensation Plan

The Company sponsors the 2018 Equity and Incentive Compensation Plan (the “2018 Equity Plan”). See Note 11 to the Company’s audited consolidated financial statements in the 2019 annual report on Form 10-K for more information on the 2018 Equity Plan and ~~restricted stock~~stock-based compensation awards for the year ended ~~2018.~~ 2019, including restricted stocks and restricted stock units (“RSUs”).

Restricted Stock Awards

The ~~2018 Equity Plan was renamed as of August 8, 2019 to reflect~~following table shows the ~~change of the Company’s name to Amerant Bancorp Inc. on June 5, 2019.~~

~~On January 22, 2019, the Company granted an additional 1,299 shares~~activity of restricted stock ~~to an employee who was not included in~~awards during the December 21, 2018 restricted stock award. These shares of restricted stock will vest in three approximately equal amounts on each of January 21, 2020, 2021 and 2022. The fair value of the restricted stock granted was based on the market price of the shares of the Company’s Class A common stock at the grant date which was $13.58 per share.

~~During the three and~~ six ~~month periods~~months ended June 30, ~~2019, the~~2020:



	Number of restricted shares		Weighted-average grant date fair value
Non-vested shares, beginning of year	495,131		$	13.48
Granted	6,591		15.17
Vested	(433	)	13.58
Forfeited	(64,281	)	13.45
Non-vested shares at June 30, 2020	437,008		$	13.51

The Company recorded ~~$1.5 million and $3.0 million, respectively, of~~ compensation expense related to the restricted stock awards ~~granted in December 2018~~of $0.6 million and ~~January 2019. The~~$1.5 million during the three months ended June 30, 2020 and 2019, respectively, and $1.0 million and $3.0 million during the six months ended June 30, 2020 and 2019, respectively.The total unamortized deferred compensation expense of ~~$6.8~~$2.1 million for all unvested restricted stock outstanding at June 30, ~~2019~~2020 will be recognized over a weighted average period of ~~1.6~~1.2 years.

Restricted Stock Units

The following table shows the activity of RSUs during the six months ended June 30, 2020:

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)



	Stock-settled RSUs				Cash-settled RSUs			Total RSUs
	Number of RSUs		Weighted-average grant date fair value		Number of RSUs	Weighted-average grant date fair value		Number of RSUs		Weighted-average grant date fair value
Nonvested, beginning of year	35,489		$	13.91	19,230	$	13.45	54,719		$	13.75
Granted	22,302		13.45		11,151	13.45		33,453		13.45
Vested	(3,439	)	18.17		—	—		(3,439	)	18.17
Forfeited	—		—		—	—		—		—
Non-vested, end of year	54,352		$	13.45	30,381	$	13.45	84,733		$	13.45

The Company recorded compensation expense related to RSUs of $0.1 million and $0.2 million during the the three and six months ended June 30, 2020, respectively. The total unamortized deferred compensation expense of $0.4 million for all unvested stock-settled RSUs outstanding at June 30, 2020 will be recognized over a weighted average period of 1.0 year.


9.12.	Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on ~~forecast~~forecasted annual consolidated pre-tax income, permanent tax differences and statutory tax rates. Under this method, the tax effect of certain items that do not meet the definition of ordinary income or expense are computed and recognized as discrete items when they occur.

The effective combined federal and state tax rates for the six months ended June 30, 2020 and 2019 were 20.75% and ~~2018 were~~ 21.50% ~~and 26.80%~~, respectively. Effective tax rates differ from the statutory rates mainly due to the impact of ~~forecast~~forecasted permanent non-taxable interest and other income, and the ~~impact of permanent non-deductible discrete expense items incurred during the period, which primarily include the non-deductible spin-off costs in 2018 and the~~ effect of corporate state taxes.

~~10.~~

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Notes to Interim Consolidated Financial Statements (Unaudited)

13. Accumulated Other Comprehensive Income ~~(Loss)~~ (“~~AOCI/AOCL”~~AOCI”):

The components of ~~AOCI/AOCL~~AOCI are summarized as follows using applicable blended average federal and state tax rates for each period:



	June 30, 2020							December 31, 2019
(in thousands)	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount		Tax Effect			Net of Tax Amount
Net unrealized holding gains on debt securities available for sale	$	40,935	$	(10,007	)	$	30,928	$	9,563	$	(2,338	)	$	7,225
Net unrealized holding gains on interest rate swaps designated as cash flow hedges	5,029		(1,230		)	3,799		7,953		(1,944		)	$	6,009
Total AOCI	$	45,964	$	(11,237	)	$	34,727	$	17,516	$	(4,282	)	$	13,234

June 30, 2019 December 31, 2018
(in thousands) Before Tax
Amount Tax
Effect Net of Tax
Amount Before Tax
Amount Tax
Effect Net of Tax
Amount
Net unrealized holding gains (losses) on securities available for sale $ 6,350
$ (1,552 ) $ 4,798
$ (33,145 ) $ 8,104
$ (25,041 )
Net unrealized holding gains on interest rate swaps designated as cash flow hedges 8,393
(2,052 ) 6,341
9,103
(2,226 ) $ 6,877
Total AOCI (AOCL) $ 14,743
$ (3,604 ) $ 11,139
$ (24,042 ) $ 5,878
$ (18,164 )

The components of other comprehensive income for the periods presented is summarized as follows:



	Three Months Ended June 30,
	2020									2019
(in thousands)	Before Tax Amount			Tax Effect			Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Net unrealized holding gains on debt securities available for sale:
Change in fair value arising during the period	$	12,390		$	(3,029	)	$	9,361		$	18,946		$	(4,633	)	$	14,313
Reclassification adjustment for net gains included in net income	(7,117		)	1,740			(5,377		)	(992		)	243			(749		)
	5,273			(1,289		)	3,984			17,954			(4,390		)	13,564
Net unrealized holding losses on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period	(211		)	51			(160		)	—			—			—
Reclassification adjustment for net interest income included in net income	(283		)	69			(214		)	(366		)	90			(276		)
	(494		)	120			(374		)	(366		)	90			(276		)
Total other comprehensive income	$	4,779		$	(1,169	)	$	3,610		$	17,588		$	(4,300	)	$	13,288

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Notes to Interim Consolidated Financial Statements (Unaudited)

~~The components of other comprehensive income (loss) for the periods presented is summarized as follows:~~



	Six Months Ended June 30,
	2020									2019
(in thousands)	Before Tax Amount			Tax Effect			Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Net unrealized holding gains on debt securities available for sale:
Change in fair value arising during the period	$	47,732		$	(11,669	)	$	36,063		$	40,491		$	(9,900	)	$	30,591
Reclassification adjustment for net gains included in net income	(16,360		)	4,000			(12,360		)	(996		)	244			(752		)
	31,372			(7,669		)	23,703			39,495			(9,656		)	29,839
Net unrealized holding losses on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period	(2,215		)	541			(1,674		)	(15		)	4			(11		)
Reclassification adjustment for net interest income included in net income	(709		)	173			(536		)	(695		)	170			(525		)
	(2,924		)	714			(2,210		)	(710		)	174			(536		)
Total other comprehensive income	$	28,448		$	(6,955	)	$	21,493		$	38,785		$	(9,482	)	$	29,303

Three Months Ended June 30,
2019 2018
(in thousands) Before Tax
Amount Tax
Effect Net of Tax
Amount Before Tax
Amount Tax
Effect Net of Tax
Amount
Net unrealized holding gains (losses) on securities available for sale:
Change in fair value arising during the period $ 18,946
$ (4,633 ) $ 14,313
$ (6,716 ) $ 1,262
$ (5,454 )
Reclassification adjustment for net gains included in net income (992 ) 243
(749 ) (16 ) 4
(12 )
17,954
(4,390 ) 13,564
(6,732 ) 1,266
(5,466 )
Net unrealized holding gains on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period —
—
—
2,574
(435 ) 2,139
Reclassification adjustment for net interest (income) expense included in net income (366 ) 90
(276 ) 19
(5 ) 14
(366 ) 90
(276 ) 2,593
(440 ) 2,153
Total other comprehensive income (loss) $ 17,588
$ (4,300 ) $ 13,288
$ (4,139 ) $ 826
$ (3,313 )

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Notes to Interim Consolidated Financial Statements (Unaudited)

Six Months Ended June 30,
2019 2018
(in thousands) Before Tax
Amount Tax
Effect Net of Tax
Amount Before Tax
Amount Tax
Effect Net of Tax
Amount
Net unrealized holding gains (losses) on securities available for sale:
Change in fair value arising during the period $ 40,491
$ (9,900 ) $ 30,591
$ (27,566 ) $ 7,135
$ (20,431 )
Reclassification adjustment for net gains included in net income (996 ) 244
(752 ) (16 ) 4
(12 )
39,495
(9,656 ) 29,839
(27,582 ) 7,139
(20,443 )
Net unrealized holding (losses) gains on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period (15 ) 4
(11 ) 8,608
(2,256 ) 6,352
Reclassification adjustment for net interest (income) expense included in net income (695 ) 170
(525 ) 207
(36 ) 171
(710 ) 174
(536 ) 8,815
(2,292 ) 6,523
Total other comprehensive income (loss) $ 38,785
$ (9,482 ) $ 29,303
$ (18,767 ) $ 4,847
$ (13,920 )

~~11.~~14. Stockholders’ Equity

a) Class A Common Stock

Shares of the Company’s Class A common stock issued and outstanding as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were ~~28,985,996~~28,873,196 and ~~26,851,832,~~28,927,576, respectively.

~~IPO Over-allotment Option~~

On January 23, 2019, the underwriters of the Company’s IPO partially exercised their over-allotment option by purchasing 229,019 shares of the Company’s Class A common stock at the public offering price of $13.00 per share. The net proceeds to the Company from this transaction were approximately $3.0 million.

~~Private Placements~~

On February 1, 2019 and February 28, 2019, the Company issued and sold 153,846 and 1,750,000 shares of its Class A common stock, respectively, in private placements exempt from registration under Section 4(a)(2) of the Securities Act and Securities and SEC Rule 506 (the “Private Placements”). The net proceeds to the Company from the Private Placements totaled approximately $26.7 million.

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~~Amerant Bancorp Inc. and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

b) Class B Common Stock and Treasury Stock

Shares of the Company’s Class B common stock issued as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were ~~17,751,053.~~13,286,137 and 17,751,053, respectively. As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, there were ~~14,218,596~~13,286,137 shares and ~~16,330,917~~14,218,596 shares, respectively, of Class B common stock outstanding. As of June 30, ~~2019 and~~2020, the Company had 0 shares of Class B common stock held as treasury stock. At December 31, ~~2018,~~2019, the Company had 3,532,457 shares ~~and 1,420,136 shares, respectively,~~ of Class B common stock held as treasury stock under the cost method.

On ~~March 7, 2019,~~February 14 and February 21, 2020, the Company repurchased ~~all~~an aggregate of ~~MSF’s 2,112,321 remaining~~932,459 shares of nonvoting Class B common stock ~~at a weighted average price of $13.48~~in two privately negotiated transactions (collectively, the “2020 Repurchase”) for $16.00 per share ~~with proceeds from the IPO over-allotment exercise and the Private Placements, representing an~~of Class B common stock. The aggregate purchase price for these transactions was approximately $15.2 million, including $0.3 million in broker fees and other expenses. The Company funded the 2020 Repurchase with available cash.

In March 2020, Company’s Board of ~~approximately $28.5 million. The aforementioned 2,112,321~~Directors authorized the cancellation of all 4,464,916 shares of Class B ~~common stock are~~Common Stock previously held inas treasury stock, ~~under the cost method.~~

~~Following this repurchase, MSF no longer owns any~~including shares ~~of the Company’s Class A common stock or Class B common stock,~~repurchased during 2018, 2019 and ~~therefore, MSF no longer has any rights to register Company shares for resale.~~

~~e) Dividends~~

On2020, effective March ~~13, 2018, the Company paid a special, one-time, cash dividend of $40.0 million to MSF, or $0.94 per common share.~~31, 2020.

~~12.~~15. Commitments and Contingencies

The Company and its subsidiaries are parties to various legal actions arising in the ordinary course of business. In the opinion of management, the outcome of these proceedings will not have a significant effect on the Company’s consolidated financial position or results of operations.

The Company occupies various premises under noncancelable lease agreements expiring through the year 2046. Actual rental expenses may include deferred rents that are recognized as rent expense on a straight line basis. Rent expense under these leases was approximately ~~$1.2~~$1.7 million and ~~$1.6~~$1.2 million for the three months ended June 30, ~~2019~~2020 and ~~2018~~2019, respectively, and ~~$2.8 million and and~~ $3.0 million and$2.8 millionfor the sixmonths ended June 30, 2020 and 2019, ~~and 2018,~~ respectively.

Financial instruments whose contract amount represents off-balance sheet credit risk at June 30, ~~2019~~2020 are generally short-term and are as follows:



(in thousands)	Approximate Contract Amount
Commitments to extend credit	$	786,034
Standby letters of credit	12,268
Commercial letters of credit	3,428
	$	801,730

(in thousands) Approximate
Contract
Amount
Commitments to extend credit $ 844,170
Credit card facilities 143,666
Standby letters of credit 22,068
Commercial letters of credit 8,496
$ 1,018,400

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Notes to Interim Consolidated Financial Statements (Unaudited)

~~13.~~16. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	June 30, 2019								June 30, 2020
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Third-Party Models with Observable Market Inputs (Level 2)		Internal Models with Unobservable Market Inputs (Level 3)		Total Carrying Value in the Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets (Level 1)		Third-Party Models with Observable Market Inputs (Level 2)		Internal Models with Unobservable Market Inputs (Level 3)		Total Carrying Value in the Consolidated Balance Sheet
Assets
Securities available for sale
Debt securities available for sale
U.S. government sponsored enterprise debt securities	$	—	$	933,670	$	—	$	933,670	$	—	$	831,920	$	—	$	831,920
Corporate debt securities	—		271,706		—		271,706		—		386,109		—		386,109
U.S. government agency debt securities	—		198,740		—		198,740		—		232,454		—		232,454
Municipal bonds	—		73,327		—		73,327		—		66,786		—		66,786
Mutual funds	—		23,779		—		23,779
U.S treasury securities									—		2,515		—		2,515
	—		1,501,222		—		1,501,222		—		1,519,784		—		1,519,784
Equity securities with readily determinable fair values not held for trading									—		24,425		—		24,425
Bank owned life insurance	—		208,965		—		208,965		—		214,693		—		214,693
Derivative instruments	—		10,304		—		10,304		—		47,211		—		47,211
	$	—	$	1,720,491	$	—	$	1,720,491	$	—	$	1,806,113	$	—	$	1,806,113
Liabilities
Derivative instruments	$	—	$	10,304	$	—	$	10,304	$	—	$	49,178	$	—	$	49,178

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Notes to Interim Consolidated Financial Statements (Unaudited)



	December 31, 2019
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Third-Party Models with Observable Market Inputs (Level 2)		Internal Models with Unobservable Market Inputs (Level 3)		Total Carrying Value in the Consolidated Balance Sheet
Assets
Debt securities available for sale
U.S. government sponsored enterprise debt securities	$	—	$	933,112	$	—	$	933,112
Corporate debt securities	—		252,836		—		252,836
U.S. government agency debt securities	—		228,397		—		228,397
U.S. treasury securities	—		104,236		—		104,236
Municipal bonds	—		50,171		—		50,171
	—		1,568,752		—		1,568,752
Equity securities with readily determinable fair values not held for trading	—		23,848		—		23,848
Bank owned life insurance	—		211,852		—		211,852
Derivative instruments	—		12,097		—		12,097
	$	—	$	1,816,549	$	—	$	1,816,549

Liabilities
Derivative instruments	$	—	$	11,809	$	—	$	11,809

December 31, 2018
(in thousands) Quoted
Prices in
Active
Markets
for Identical
Assets
(Level 1) Third-Party
Models with
Observable
Market
Inputs
(Level 2) Internal
Models
with
Unobservable
Market
Inputs
(Level 3) Total
Carrying
Value in the
Consolidated
Balance
Sheet
Assets
Securities available for sale
U.S. government sponsored enterprise debt securities $ —
$ 820,779
$ —
$ 820,779
Corporate debt securities —
352,555
—
352,555
U.S. government agency debt securities —
216,985
—
216,985
Municipal bonds —
160,212
—
160,212
Mutual funds —
23,110
—
23,110
Commercial paper —
12,410
—
12,410
—
1,586,051
—
1,586,051
Bank owned life insurance —
206,141
—
206,141
Derivative instruments —
11,491
—
11,491
$ —
$ 1,803,683
$ —
$ 1,803,683
Liabilities
Derivative instruments $ —
$ 2,388
$ —
$ 2,388

~~At the dates shown, there were no Level 3 assets~~ ~~or liabilities.~~

~~Level 2 Valuation Techniques~~

The valuation of securities and derivative instruments is performed through a monthly pricing process using data provided by generally recognized providers of independent data pricing services (the “Pricing Providers”). These Pricing Providers collect, use and incorporate descriptive market data from various sources, quotes and indicators from leading broker dealers to generate independent and objective valuations. The fair value of bank-owned life insurance policies is based on the cash surrender values of the policies as reported by the insurance companies.

The valuation techniques and the inputs used in our consolidated financial statements to measure the fair value of our recurring Level 2 financial instruments consider, among other factors, the following:

~~Similar securities actively traded which are selected from recent market transactions;~~

~~Observable market data which includes spreads in relationship to LIBOR, swap curve, and prepayment speed rates, as applicable; and~~

~~The captured spread and prepayment speed are used to obtain the fair value for each related security.~~

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~~Amerant Bancorp Inc. and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

On a quarterly basis, the Company evaluates the reasonableness of the monthly pricing process for the valuation of securities and derivative instruments. This evaluation includes challenging the valuation of a random sample of the different types of securities in the investment portfolio as of the end of the quarter selected. This challenge consists of obtaining from the Pricing Providers a document explaining the methodology applied to obtain their fair value assessments for each type of investment included in the sample selection. The Company then analyzes in detail the various inputs used in the fair value calculation, both observable and unobservable (e.g., prepayment speeds, yield curve benchmarks, spreads, delinquency rates). Management believes that the consistent application of this methodology allows the Company to understand and evaluate the categorization of its investment portfolio.

The methods described above may produce a fair value calculation that may differ from the net realizable value or may not be reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of its financial instruments could result in different estimates of fair value at the reporting date.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

There were no0 significant assets or liabilities measured at fair value on a nonrecurring basis at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

Fair Value of Financial Instruments

The fair value of a financial instrument represents the price that would be received from its sale in an orderly transaction between market participants at the measurement date. The best indication of the fair value of a financial instrument is determined based upon quoted market prices. However, in many cases, there are no quoted market prices for the Company’s various financial instruments. As a result, the Company derives the fair value of the financial instruments held at the reporting period-end, in part, using present value or other valuation techniques. Those techniques are significantly affected by management’s assumptions, the estimated amount and timing of future cash flows and estimated discount rates included in present value and other techniques. The use of different assumptions could significantly affect the estimated fair values of the Company’s financial instruments. Accordingly, the net realized values could be materially different from the estimates presented below.

~~The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:~~

Because of their nature and short-term maturities, the carrying values of the following financial instruments were used as a reasonable estimate of their fair value: cash and cash equivalents, interest earning deposits with banks, variable-rate loans with re-pricing terms shorter than twelve months, demand and savings deposits, short-term time deposits and other borrowings.

The fair value of loans held for sale, securities, bank owned life insurance and derivative instruments, are based on quoted market prices, when available. If quoted market prices are unavailable, fair value is estimated using the pricing process described in Note 17 to the Company’s audited consolidated financial statements in the Form 10-K.

The fair value of commitments and letters of credit is based on the assumption that the Company will be required to perform on all such instruments. The commitment amount approximates estimated fair value.

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~~Amerant Bancorp Inc. and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

The fair value of advances from the FHLB, junior subordinated debentures and fixed-rate loans are estimated using a present value technique by discounting the future expected contractual cash flows using the current rates at which similar instruments would be issued with comparable credit ratings and terms at the measurement date.

The fair value of long-term time deposits, including certificates of deposit, is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date.

The estimated fair value of financial instruments where fair value differs from carrying value are as follows:



	June 30, 2020				December 31, 2019
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Loans	$	2,966,143	$	2,847,190	$	2,819,477	$	2,721,291
Financial liabilities:
Time deposits	1,833,597		1,864,959		1,745,735		1,759,347
Advances from the FHLB	1,050,000		1,083,807		1,235,000		1,244,515
Senior notes	58,419		60,724		—		—
Junior subordinated debentures	64,178		53,180		92,246		86,738

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

June 30, 2019 December 31, 2018
(in thousands) Carrying
Value Estimated
Fair
Value Carrying
Value Estimated
Fair
Value
Financial assets
Loans $ 2,768,972
$ 2,650,162
$ 2,850,015
$ 2,739,721
Financial liabilities
Time deposits 1,721,207
1,733,538
1,745,025
1,740,752
Advances from the FHLB 1,125,000
1,136,506
1,166,000
1,167,213
Junior subordinated debentures 118,110
114,581
118,110
99,450


~~14.~~17.	Earnings Per Share

The following table shows the calculation of basic and diluted earnings per share:



	Three Months ended June 30,					Six Months Ended June 30,
(in thousands, except per share data)	2020			2019		2020			2019
Numerator:
Net (loss) income available to common stockholders	$	(15,279	)	$	12,857	$	(11,897	)	$	25,928
Denominator:				`
Basic weighted average shares outstanding	41,720			42,466		41,953			42,610
Dilutive effect of share-based compensation awards	—			353		—			255
Diluted weighted average shares outstanding	41,720			42,819		41,953			42,865

Basic (loss) earnings per common share	$	(0.37	)	$	0.30	$	(0.28	)	$	0.61
Diluted (loss) earnings per common share	$	(0.37	)	$	0.30	$	(0.28	)	$	0.60

Three months ended June 30, Six months ended June 30,
(in thousands, except per share data) 2019 2018 2019 2018
Numerator:
Net income available to common stockholders $ 12,857
$ 10,423
$ 25,928
$ 19,852
Denominator:
Basic weighted average shares outstanding 42,466
42,489
42,610
42,489
Dilutive effect of share-based compensation awards 353
—
255
—
Diluted weighted average shares outstanding 42,819
42,489
42,865
42,489

Basic earnings per common share $ 0.30
$ 0.25
$ 0.61
$ 0.47
Diluted earnings per common share $ 0.30
$ 0.25
$ 0.60
$ 0.47

~~Table~~As of ~~Contents~~

~~Amerant Bancorp Inc.~~June 30, 2020 and ~~Subsidiaries~~

~~Notes~~2019, potential dilutive instruments consisted of unvested shares of restricted stock and restricted stock units mainly related to ~~Interim Consolidated Financial Statements (Unaudited)~~

the Company’s IPO in 2018, totaling 491,360 and 789,652, respectively. As of June 30, 2020, potential dilutive instruments were not included in the diluted earnings per share computation because the Company reported a net loss and their inclusion would have an anti-dilutive effect. As of June 30, 2019, potential dilutive instruments consist of 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the Company’s IPO and 1,299 additional shares of restricted stock issued in January 2019. As of June 30, 2019, these 738,138 unvested shares of restricted stock were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at ~~that date,~~those dates, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at ~~that date,~~those dates, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, ~~in the three and six months ended June 30, 2019,~~ and had a dilutive effect in per share ~~earnings for the three (not shown due to rounding) and six months ended June 30, 2019. As of June 30, 2018, the Company had no potentially dilutive instruments.~~earnings.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is designed to provide a better understanding of various factors related to Amerant Bancorp Inc.’s (the “Company,” “Amerant,” “our” or “we”) results of operations and financial condition and its wholly owned subsidiaries, including its principal subsidiary, Amerant Bank, N.A. (the “Bank”). The Bank has ~~two~~three principal subsidiaries, Amerant Trust, N.A. (“Amerant Trust”), a non-depository trust company, ~~and~~ Amerant Investments, Inc., a securities broker-dealer (“Amerant Investments”), and a grand-Cayman based trust company subsidiary Elant Bank & Trust LTD. (the “Cayman Bank”).

This discussion is intended to supplement and highlight information contained in the accompanying unaudited interim consolidated financial statements and related footnotes included in this Quarterly Report on Form 10-Q (“Form 10-Q”), as well as the information contained in the Company’s annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on ~~April 1, 2019~~March 16, 2020 (“Form 10-K”).

Cautionary Notice Regarding Forward-Looking Statements

Various of the statements made in this Form 10-Q, including information incorporated herein by reference to other documents, are “forward-looking statements” within the meaning of, and subject to, the protections of the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements include, without limitation, future financial and operating results; costs and revenues; economic conditions generally and in our markets and among our customer base; the challenges and uncertainties caused by the COVID-19 pandemic; the measures we have taken in response to the COVID-19 pandemic; our participation in the Paycheck Protection Program (“PPP”); loan demand; ~~drivers for improvement;~~ changes in the mix of our earning assets and our deposit and wholesale liabilities; net interest income and margin; yields on earning assets; interest rates and yield curves (generally and those applicable to our assets and liabilities); credit quality, including loan performance, ~~nonperforming~~non-performing assets, provisions for loan losses, charge-offs, other-than-temporary impairments and collateral values; the effect of redemptions of certain fixed rate trust preferred securities and related junior subordinated debt; rebranding and staff realignment costs and expected savings; market trends; ~~and~~ customer preferences and anticipated closures of banking centers in Florida and Texas, as well as statements with respect to our objectives, expectations and intentions and other statements that are not historical facts. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “could,” “intend,” “target,” “goals,” “outlooks,” “modeled” and other similar words and expressions of the future in this Form 10-Q. These forward-looking statements should be read together with the “Risk Factors” included in this Form 10-Q, our Form 10-K and our other reports filed with the SEC. Additionally, these forward-looking statements may not be realized due to a variety of factors which are, in some cases, beyond the Company’s control and which could materially affect the Company’s results of operations, financial condition, cash flows, performance or future achievements or events. Currently, one of the most significant factors, is the potential adverse effect of the COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company and its customers and the global economy and financial markets. The extent of the impact of COVID-19 over the Company and its customers will depend on a number of issues and future developments, which, at this time, are extremely uncertain and cannot be accurately predicted, including ~~without limitation:~~the scope, severity and duration of the pandemic, the actions taken to contain or mitigate the impact of the pandemic, and the direct and indirect effects that the pandemic and related containment measures may have, among others. You should consider many of the risks listed in this report together with those risks and uncertainties described in “Risk factors” in our Form 10-K and in our other filings with the SEC, as being heightened as a result of the ongoing COVID-19 pandemic.

Additional factors that may cause actual results to deviate significantly from current expectations include but are not limited to:

the COVID-19 pandemic has significantly impacted economic conditions globally and in the United States, could have a material adverse effect on our ~~ability~~business, financial condition and results of operation, and the ultimate impact on our business, financial condition and results of operations, will depend on future developments and other factors that are highly uncertain and will be impacted by the scope, severity and duration of the pandemic and actions taken by governmental authorities in response;

as a participating lender in the U.S. Small Business Administration (“SBA”) PPP, the Company and the Bank are subject to ~~successfully execute~~ additional risks of litigation from the Bank’s customers or other parties regarding the Bank’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties;

our strategic plan ~~manage our~~and growth and achieve our performance targets which assume, among other things, continued growth in our domestic loans, increased domestic deposits, increased cross-selling of services, increased efficiency and cost savings;

~~the effects of future economic, business, and market condition changes, domestic and foreign, especially those affecting our Venezuelan depositors and credit card holders;~~

~~business and economic conditions, generally and especially in our primary market areas;~~strategy may not be achieved as quickly or as fully as we seek;

operational risks are inherent toin our ~~business;~~businesses;

market conditions and economic cyclicality may adversely affect our industry;

our ~~ability to successfully manage our credit risks~~profitability and ~~the sufficiency of our allowance for possible loan losses;~~

the failure of assumptions and estimates, as well as differences in, and changes to, economic, market, interest rate, and credit conditions, including changes in borrowers’ credit risks and payment behaviors, including those resulting from the changes to our credit card program in April 2019;

compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with mortgage origination, sale and servicing operations;

compliance with the Bank Secrecy Act of 1970, the rules of the Treasury Department’s Office of Foreign Assets Control and anti-money laundering laws and regulations, especially given our exposure to Venezuela customers;

~~governmental monetary and fiscal policies, including market interest rates;~~

~~the effectiveness of our enterprise risk management framework, including internal controls and disclosure controls;~~

~~fluctuations in the values of the securities held in our securities portfolio;~~

~~the risks of~~liquidity may be affected by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions;

our cost of funds may increase as a result of general economic conditions, interest rates, inflation and competitive pressures;

many of our loans and our obligations for borrowed money are priced based on variable interest rates tied to the ~~levels, composition~~London Interbank Offering Rate, or LIBOR. We are subject to risks that LIBOR will no longer be available as a result of the United Kingdom’s Financial Conduct Authority ceasing to require the submission of LIBOR quotes after 2021;

our derivative instruments may expose us to certain risks;

our valuation of securities and ~~costs of deposits, loan demand,~~investments and the ~~values and liquidity of loan collateral, securities, and interest-sensitive assets and liabilities, and the risks and uncertainty~~determination of the ~~amounts realizable;~~amount of impairments taken on our investments are subjective and, if changed, could materially adversely affect our results of operations or financial condition;

~~changes~~our success depends on our ability to compete effectively in ~~the availability~~highly competitive markets;

our success depends on general and ~~cost~~local economic conditions where we operate;

severe weather, natural disasters, global pandemics, acts of ~~credit and capital in the financial markets, and the types of instruments that may be included as capital for regulatory purposes;~~

~~changes in the prices, values and sales volumes of residential real estate and CRE;~~

~~the~~war or terrorism, theft, civil unrest, government expropriation or other external events could have significant effects of competition from a wide variety of local, regional, national and other providers of financial, investment, trust and other wealth management services and insurance services, including the disruptive effects of financial technology companies and other competitors who are not subject to the same regulations as the Company and the Bank;on our business;

defaults by or deteriorating asset quality of other ~~institutions;~~financial institutions could adversely affect us;

nonperforming and similar assets take significant time to resolve and may adversely affect our results of operations and financial condition;

changes in the ~~failure~~real estate markets, including the secondary market for residential mortgage loans, may adversely affect us;

our allowance for loan losses may prove inadequate or we may be negatively affected by credit risk exposures;

if our business does not perform well, we may be required to recognize an impairment of ~~assumptions~~our goodwill or other long-lived assets or to establish a valuation allowance against the deferred income tax asset, which could adversely affect our results of operations or financial condition;

mortgage servicing rights, or MSRs, requirements may change and ~~estimates underlying the establishment~~require us to incur additional costs and risks;

we may be contractually obligated to repurchase mortgage loans we sold to third-parties on terms unfavorable to us;

our concentration of ~~allowances for possible~~CRE loans could result in further increased loan losses, and ~~other asset impairments, losses, valuations~~adversely affect our business, earnings, and financial condition;

liquidity risks could affect operations and jeopardize our financial condition;

certain funding sources may not be available to us and our funding sources may prove insufficient and/or costly to replace;

our Venezuelan deposit concentration may lead to conditions in Venezuela adversely affecting our operations;

our investment advisory and trust businesses could be adversely affected by conditions affecting our Venezuelan customers;

our brokered deposits and wholesale funding increases our liquidity risk, could increase our interest rate expense and potentially increase our deposit insurance costs;

technological changes affect our business including potentially impacting the revenue stream of ~~assets~~traditional products and ~~liabilities~~services, and we may have fewer resources than many competitors to invest in technological improvements;

potential gaps in our risk management policies and internal audit procedures may leave us exposed to unidentified or unanticipated risk, which could negatively affect our business;

we may determine that our internal controls and disclosure controls could have deficiencies or weaknesses;

any failure to protect the confidentiality of customer information could adversely affect our reputation and subject us to financial sanctions and other ~~estimates, including~~costs that could have a material adverse effect on our business, financial condition and results of operations;

our information systems may experience interruptions and security breaches, and are exposed to cybersecurity threats;

future acquisitions and expansion activities may disrupt our business, dilute shareholder value and adversely affect our operating results;

attractive acquisition opportunities may not be available to us in the ~~timing~~future;

certain provisions of our amended and restated articles of incorporation and amended and restated bylaws, Florida law, and U.S. banking laws could have anti-takeover effects by delaying or preventing a change of ~~the implementation of the current expected credit losses model~~control that you may favor;

we may be unable to attract and retain key people to support our business;

our employees may take excessive risks which could negatively affect our financial ~~instruments (“CECL”)~~condition and ~~the change~~business;

we are subject to extensive regulation that could limit or restrict our activities and adversely affect our earnings;

litigation and regulatory investigations are increasingly common in our ~~credit card programs;~~

~~the risks of mergers, acquisitions~~businesses and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growthmay result in significant financial losses and/or ~~expense savings~~harm to our reputation;

we are subject to capital adequacy and liquidity standards, and if we fail to meet these standards our financial condition and operations would be adversely affected;

our operations are subject to risk of loss from ~~such transactions;~~unfavorable fiscal, monetary and political developments in the U.S. and other countries where we do business;

changes in ~~technology or products that may be more difficult, costly, or less effective than anticipated;~~accounting rules applicable to banks and financial institutions could adversely affect our financial condition and results of operations;

the ~~effects~~Dodd-Frank Act currently restricts our future issuance of ~~war, civil unrest,~~trust preferred securities and cumulative preferred securities as eligible Tier 1 risk-based capital for purposes of the regulatory capital guidelines for bank holding companies;

we may need to raise additional capital in the future, but that capital may not be available when it is needed or ~~other conflicts, acts~~on favorable terms;

we will be subject to heightened regulatory requirements if our total assets grow in excess of ~~terrorism, hurricanes or other catastrophic events that~~$10 billion;

the Federal Reserve may ~~affect general economic conditions, including in countries where~~ require us to commit capital resources to support the Bank;

we ~~have depositors~~may face higher risks of noncompliance with the Bank Secrecy Act and other ~~customers;~~anti-money laundering statutes and regulations than other financial institutions;

failures to comply with the ~~effects~~fair lending laws, CFPB regulations or the Community Reinvestment Act could adversely affect us;

Fannie Mae and Freddie Mac restructuring may adversely affect the mortgage markets;

we adopted a new accounting principle that requires immediate recognition in the statement of ~~recent and future legislative and regulatory changes, including~~income of unrealized changes in ~~banking,~~the fair value of equity securities, ~~tax, trade~~which includes mutual funds, increasing the volatility of our results of operations;

we changed our brand from “Mercantil” to “Amerant,” which could adversely affect our business and ~~finance laws,~~profitability;

we are incurring incremental costs as a separate, public company;

as a separate, public company, we spend additional time and resources to comply with rules and regulations ~~such~~that previously did not apply to us;

our historical consolidated financial data are not necessarily representative of the results we would have achieved as a separate company and may not be a reliable indicator of our future results;

certain of our directors may have actual or potential conflicts of interest because of their equity ownership in Mercantil Servicios Financieros, C.A., or the ~~planned cessation~~Former Parent, or their positions with the Former Parent and us;

if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of ~~LIBOR,~~our common stock and ~~their application~~trading volume could decline;

our stock price may fluctuate significantly;

a limited market exists for the Company’s shares of Class B common stock on the Nasdaq Global Select Market. An active trading market may not develop or continue for the Company’s shares of Class B common stock, which could adversely affect the market price and market volatility of those shares;

certain of our existing stockholders could exert significant control over the Company;

we have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock;

we expect to issue more Class A common stock in the future which may dilute holders of Class A common stock;

holders of Class B common stock have limited voting rights. As a result, holders of Class B common stock will have limited ability to influence shareholder decisions;

our dual classes of common stock may limit investments by investors using index-based strategies;

we are an “emerging growth company,” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our ~~regulators;~~common stock may be less attractive to investors;

we do not currently intend to pay dividends on our common stock;

our ability to ~~continue~~pay dividends to ~~increase~~shareholders in the future is subject to profitability, capital, liquidity and regulatory requirements and these limitations may prevent us from paying dividends in the future;

we face strategic risks as an independent company and from our ~~core domestic deposits, and reduce~~history as a part of the ~~percentage of foreign deposits;~~

Former Parent;

the ~~occurrence of fraudulent activity, data breaches or failures~~fair value of our ~~information security controls or cybersecurity-related incidents~~investment securities can fluctuate due to market conditions out of our control;

we may not be able to generate sufficient cash to service all of our debt, including the Senior Notes;

we and Amerant Florida Bancorp Inc., the subsidiary guarantor, are each a holding company with limited operations and depend on our subsidiaries for the funds required to make payments of principal and interest on the Senior Notes;

we may incur a substantial level of debt that ~~may compromise our systems or customers’ information;~~

~~interruptions involving our information technology and telecommunications systems or third-party services;~~

~~changes in our senior management team and~~could materially adversely affect our ability to ~~attract, motivate and retain qualified personnel consistent with~~generate sufficient cash to fulfill our ~~strategic plan;~~

obligations under the ~~costs and obligations associated with being a newly public company;~~

~~our ability to maintain our strong reputation, particularly in light of our ongoing rebranding effort;~~

~~claims or legal actions to which we may be subject;~~Senior Notes; and

the other factors and information in our Form 10-K and in this Form 10-Q and other filings that we make with the SEC under the Exchange Act and Securities Act. See “Risk Factors” in our Form ~~10-K.~~10-K and this Form 10-Q.

Forward-looking statements, including those as to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the Company’s actual results, performance, achievements, or financial condition to be materially different from future results, performance, achievements, or financial condition expressed or implied by such forward-looking statements. You should not rely on any forward-looking statements as predictions of future events. In addition, our past results of operations are not necessarily indicative of our future results of operations. You should not expect us to update any forward-looking ~~statements.~~statements, except as required by law. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, together with those risks and uncertainties described in “Risk factors” in our Form 10-K, in this Form 10-Q and in our other filings with the SEC, which are available at the SEC’s website ~~www.sec.gov~~.www.sec.gov.

OVERVIEW

Our Company

We are a bank holding company headquartered in Coral Gables, Florida. We provide individuals and businesses a comprehensive array of deposit, credit, investment, wealth management, retail banking and fiduciary services. We serve customers in our United States markets and select international customers. These services are offered primarily through the Bank and its Amerant Trust, ~~and~~ Amerant Investments, and Cayman Bank subsidiaries. The Bank’s three primary markets are South Florida, where we operate 1519 banking centers in Miami-Dade, Broward and Palm Beach counties; the greater Houston, Texas area where we have eight banking centers that serve nearby areas of Harris, Montgomery, Fort Bend and Waller counties, and a loan production office (“LPO”) in Dallas, Texas which opened in early 2019, and the greater New York City area, New York, where we also maintain a LPO that focuses on originating commercial real estate (“CRE”) loans. The Company is in the process of closing one banking center in Florida and another in Texas, which the Company expects to complete by year-end 2020. These closures are the result of extensive analyses of the profitability of the Company’s retail banking network and their current and expected individual contributions to achieving the Company’s strategic goals.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization recognized an outbreak of a novel strain of the coronavirus, COVID-19, as a pandemic.

On March 13, 2020, the President of the Unites States of America (U.S.) declared a national state of emergency. In response to this outbreak, the governments of many states, cities and municipalities in the U.S., including the States of Florida, New York and Texas, have taken preventative or protective actions, such as imposing restrictions on business operations and advising or requiring individuals to limit or forego their time outside of their homes.

Business Continuity Plan Activated

The health and well-being of the Company’s employees, customers, and local communities remains paramount while the Company continues to provide the necessary services and products to customers with minimal disruption.

On March 16, 2020, we activated the Company's well-established Business Continuity Plan, or BCP. The BCP has effectively ensured the Company's resilient platform continues to operate ~~loan production offices. We~~during these extraordinary times, and has allowed us to continue providing the quality of products and services our customers have ~~no foreign offices.~~

~~Rebranding~~

~~We launched “Amerant” as our new brand across all~~come to expect. The plan is supported and complemented by a robust business continuity governance framework, life safety program and annual enterprise-wide exercise and training program. The Company’s BCP plan is framed based on industry best practices and regulatory guidelines and is subject to periodic testing and independent audits. As of June 30, 2020, approximately 86% of the Company’s employees are working remotely. On June 3, 2020, the Company started Phase 1 of reintroducing employees working remotely back to the workplace. Given the increasing trend in COVID-19 cases in our markets, particularly in Florida and Texas, during the month of June and continuing in July, we are following a careful, phased-approach which includes a voluntary return of a limited number of employees, based on work location, roles and responsibilities, and various safety protocols. Banking centers have returned to regular business hours, following strict federal, state and local government guidelines supporting the safety of our employees and our customers. Amerant continues to focus on serving customers without interruption, while maintaining a safe environment.

During the first half of 2020, there were no staffing changes resulting from the COVID-19 pandemic.

Supporting Our Communities

Beginning on March 26, 2020, we began providing an array of tangible and meaningful support measures to support our customers and communities during the COVID-19 pandemic. These measures include waiving the Bank’s ATM fees for customers and non-customers, late payment fees on all consumer and business loans, and deposit account fees on a case-by-case basis. Measures related to waiving of fees, with the exception of late payment fees on loans, were discontinued during the third quarter. The Bank is also refraining from reporting negative information such as past due balances to credit bureaus, and, importantly, offering individualized loan payment assistance such as interest payment deferral and forbearance options. Additionally, in April ~~2019. The launch included rebranding~~2020, the Bank increased its mobile check deposit limits. All of ~~all digital platforms, new signs in most branches~~these efforts align with regulatory guidance aimed at helping customers and ~~buildings,~~communities, while remaining prudent and ~~a broad campaign through digital~~manageable, and traditional media focused on brand awareness. We expect our rebranding to be substantially completed during the fourth quarter of 2019, and we expect to spend approximately $1.8 million in additional rebranding expenses for the second half of 2019. In addition, we expect to incur approximately $1.2 million in capital expenditures, or CAPEX, which will ~~be amortized over the shorter of seven years (the estimated useful life of our signs), the remaining life of owned buildings or the remaining terms of leased facilities.~~continue until further notice.

CARES Act

On ~~June 4, 2019,~~March 27, 2020, the ~~Company’s stockholders approved~~Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), an ~~amendment~~approximately $2.0 trillion COVID-19 response bill, to provide emergency economic relief to individuals, small businesses, mid-size companies, large corporations, hospitals and other public health facilities, and state and local governments, was enacted. The CARES Act allocated the SBA $350.0 billion to provide loans of up to $10.0 million per small business as defined in the CARES Act. On April 2, 2020, the Bank began participating in the SBA’s PPP, by providing loans to these businesses to cover payroll, rent, mortgage, healthcare, and utilities costs, among other essential expenses. On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act, adding funding to the ~~Company’s Amended~~PPP, was enacted. On July 4, 2020, new legislation was signed into law that extended the availability of loans from June 30, 2020 until August 8, 2020. As of June 30, 2020, total PPP loans were $214.1 million, representing over 2,000 loans approved. Over 90% of these loans were under $350,000 each.

Loan Loss Reserve and Restated Articles of Incorporation (the “Articles of Incorporation”) to change the Company’s name from “Mercantil Bank Holding Corporation” to “Amerant Bancorp Inc.” (the “Name Change”). The Name Change became effective on June 5, 2019. Each ofMitigation Programs

On March 26, 2020, the Company began offering loan payment relief options to customers impacted by the ~~Bank and its principal subsidiaries now operate under the “Amerant” brand.~~

~~Segment Reporting~~

~~Beginning~~COVID-19 pandemic, including interest-only and/or forbearance options. These programs continued in the second quarter of ~~2019, all decisions, including~~2020. As of June 30, 2020, loans modified under these programs totaled $1.1 billion. As of this date, loans in these programs on which the interest-only/or forbearance period expired at that date totaled $504.7 million, or 45.4% of total modified loans. The Company collected payments due on $8.4 million of modified loans through June 30, 2020. Modified loans totaling $496.3 million have payments due by July 31, 2020. In accordance with accounting and regulatory guidance, loans to borrowers benefiting from these measures are not considered Troubled Debt Restructurings (“TDRs”). The Company is closely monitoring the performance of these loans under the terms of the temporary relief granted.The following table summarizes the loan balances in these programs as of July 31, 2020, June 30, 2020 and May 1, 2020:



Program Detail	July 31, 2020		June 30, 2020		May 1, 2020
(in thousands)
90-day payment deferral; interest added to principal balance upon modification and continues to accrue each month	$	184,665	$	349,166	$	451,076
90-day interest payment deferral with no escrow payments	84,449		133,761		441,212
90-day interest payment deferral including escrow payments	18,764		150,464		196,809
180-day interest payment deferral	20,973		20,973		29,906
	$	308,851	$	654,364	$	1,119,003

The Company performed a comprehensive review of its loan exposures by industry to identify those ~~relating~~most susceptible to ~~loan growth and concentrations, deposit and other funding, market risk,~~increased credit risk ~~operational risk and pricing are made after assessing their effects on the Company~~ as a whole, using a single segment concept. This change is consistent with the Company’s strategic shift to focus on community banking after the spin-off from its former parent (“MSF” or “the Former Parent”) in August 2018, and the rebranding of the Company launched in April 2019. As part of this strategic shift, the Company has significantly reduced its international lending activities which had been largely allocated to the Corporate LATAM segment. As a result, management reassessed the Company’s remaining international business activities as well as the remaining three segments to determine whether the Company would continue to manage these businesses as separate operating segments, or consolidated as one single segment. In performing its assessment, management noted a similarity in the nature of products and services, processes, type of customers, distribution methods, and regulatory environment of its businesses. Further, management determined that it will no longer review discrete financial information related to the remaining operating segments for purposes of assessing performance or to allocate resources.

As a result of the ~~above referenced strategic shift, assessments~~COVID-19 pandemic. The Company estimated the outstanding loan portfolio is represented by loans to borrowers in industries, or with collateral values, that are potentially more vulnerable to the financial impact of the pandemic to be approximately 42% at June 30 2020, up from approximately 30% of loans at March 31, 2020. The Company estimates approximately 67% of these loans are secured with real estate collateral at June 30, 2020, compared to approximately 50% at March 31, 2020.

The Company recorded a provision for loan losses of $48.6 million during the second quarter of 2020, compared to $22.0 million in the first quarter of 2020. The Company had released $1.4 million in the second quarter of 2019. The increase during the second quarter of 2020 is mainly due to a provision of $28.2 million due to specific reserve requirements as a result of loan portfolio deterioration and ~~determination,~~downgrades during the second quarter of 2020. In addition, the increase in the provision for loan losses during the second quarter of 2020 included $20.2 million driven by estimated probable losses reflecting deterioration in the macro-economic environment as a result of the COVID-19 pandemic across multiple impacted sectors.

The Company consistently reviews its existing credit approval practices to ensure that sound and prudent underwriting standards continue to drive the Company’s business relationships. As a result, the Company enhanced the monitoring of its entire loan portfolio and has proactively increased the frequency of periodic reviews and conversations with loan customers in anticipation of their future needs, which aligns with our relationship-centric banking model.

Risks and Uncertainties

The COVID-19 pandemic has severely restricted the level of economic activity in the U.S. and around the world since March 2020. Several states and cities across the U.S., including the States of Florida, New York and Texas and cities where we have banking centers, LPOs and where our principal place of business is ~~now managed as a single operating segment,~~located, have also implemented quarantines, restrictions on ~~a consolidated basis. Therefore, beginning with the quarter ended June 30, 2019,~~travel, “shelter at home” orders, and restrictions on types of business that may continue to operate. While some of these measures and restrictions have been lifted and certain businesses have reopened, the Company ~~determined~~cannot predict when restrictions currently in place may be lifted, or whether restrictions that ~~no separate current~~have been lifted will need to be imposed or ~~historical reportable segment disclosures are required~~tightened in the future if viewed as necessary due to public health concerns. For example, the States of Florida and Texas have seen increases in the cases of COVID-19 during the second quarter and into the third quarter which may prompt state or local governments to reinstate certain measures and restrictions. Given the uncertainty regarding the spread and severity of the COVID-19 pandemic and its adverse effects on the U.S. and global economies, the impact to the Company’s financial statements cannot be accurately predicted at this time. See—Risk Factors under ~~U.S. GAAP.~~Part II, Item 1A in this Form 10-Q.

Primary Factors Used to Evaluate Our Business

Results of Operations. In addition to net income (loss), the primary factors we use to evaluate and manage our results of operations include net interest income, noninterest income and ~~noninterest expenses.~~expenses, ROA and ROE.

Net Interest Income. Net interest income represents interest income less interest expense. We generate interest income from interest, dividends and fees received on interest-earning assets, including loans and investment securities we own. We incur interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, and borrowings such as advances from the Federal Home Loan Bank ~~(the “FHLB”~~(“FHLB”) and other borrowings such as repurchase agreements, senior notes and junior subordinated debentures. Net interest income typically is the most significant contributor to our revenues and net income. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest-earning assets; (ii) the costs of our deposits and other funding sources; (iii) our net interest spread; (iv) our net interest margin, or NIM; and (v) our provisions for loan losses. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. NIM is calculated by dividing net interest income for the period by average interest-earning ~~assets.~~assets during that same period. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and stockholders’ equity, also fund interest-earning assets, NIM includes the benefit of these noninterest-bearing sources of funds. Non-refundable loan origination fees, net of direct costs of originating loans, are deferred and recognized over the life of the related loan as an adjustment to interest income in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Changes in market interest rates and the interest we earn on interest-earning assets, or which we pay on interest-bearing liabilities, as well as the volumes and the types of interest-earning assets, interest-bearing and ~~noninterest-~~

~~bearing~~noninterest-bearing liabilities and stockholders’ equity, usually have the largest impact on periodic changes in our net interest spread, NIM and net interest income. We measure net interest income before and after the provision for loan losses.

Noninterest Income. Noninterest income consists of, among other revenue streams: (i) service fees on deposit accounts; (ii) income from brokerage, advisory and fiduciary activities; (iii) benefits from and changes in cash surrender value of bank-owned life insurance, or BOLI, policies; (iv) card and trade finance servicing fees; (v) securities gains or losses; (vi) net gains and losses on early extinguishment of FHLB advances; and (vii) other noninterest income. In 2019, noninterest income also included data processing and fees for other services provided to ~~our~~the Company’s Former Parent and its ~~affiliates; (vi) securities gains or losses; and (vii) other noninterest income.~~affiliates.

Our income from service fees on deposit accounts is affected primarily by the volume, growth and mix of deposits we hold. ~~Fees~~These are affected by ~~the volume of customer transactions,~~ prevailing market ~~conditions, including~~pricing of deposit services, interest rates, ~~generally, and for deposit products,~~ our marketing efforts and other factors.

Our income from brokerage, advisory and fiduciary activities consists of brokerage commissions related to ~~the~~our customers’ trading volume, ~~of our customers’ transactions,~~ fiduciary and investment advisory fees generally based on a percentage of the average value of assets under management and custody, and account administrative services and ancillary fees during the contractual period. Our assets under management and custody (“AUM”) accounts ~~increased $195.0 million, or 12.2%, to $1.8~~totaled $1.72 billion at June 30, ~~2019~~2020, a decrease of $100.0 million from ~~$1.6~~$1.82 billion at December 31, ~~2018.~~2019. The ~~Company~~decrease is ~~focused on leveraging our wealth management platform~~mainly attributable to ~~grow this side~~lower valuations resulting from the global financial impact of ~~our domestic business.~~the COVID-19 pandemic, partially offset by account growth due to the Company’s increasingly successful sales efforts.

Income from changes in the cash surrender value of our BOLI policies represents the ~~amount~~amounts that may be realized under the contracts with the insurance carriers, which are nontaxable.

Credit card issuance fees ~~currently~~ are generally recognized over the period in which the cardholders are entitled to use the cards. Interchange fees, other fees and revenue sharing are recognized when earned. Trade finance servicing fees, which primarily include commissions on letters of credit, are generally recognized over the service period on a straight line basis. Card servicing fees ~~has~~have included credit card issuance and credit and debit card interchange and other fees.

We ~~have been revising~~revised our card program to continue to serve our card customers, reduce risks and increase the efficiency of a relatively small program. ~~Under~~We entered into referral arrangements with recognized U.S.-based card issuers, which permit us to serve our ~~new credit card arrangements, we will~~international and domestic customers and earn referral fees and a share ~~in a portion of card revenues from cards that we refer~~interchange revenue without exposure to ~~the unaffiliated card issuer.~~credit risk. Our credit card issuance and interchange fees, and interest, ~~will decrease~~decreased as we ~~cease~~ceased to be a direct card issuer. ~~We entered into an arrangement with a major U.S.-based global card issuer~~

In 2019 and began referring our international customers to it in May 2019. We expect to market this program to our other foreign customers in the Fall of 2019 when foreign cardholders’ charge privileges will end. We are currently negotiating a similar referral program with another card issuer for our domestic customers. These programs will permit us to serve our customers and earn referral fees and a share of card revenue without credit risk to our balance sheet.

~~We have~~prior periods, we historically provided certain administrative services to ~~our~~the Former ~~Parent and its~~Parent’s non-U.S. affiliates under certain administrative ~~services~~ and transition service agreements with arms-length terms and ~~charges.~~pricing. Income from this source was generally based on ~~changes to~~ the direct costs associated with providing the services plus a markup, and ~~based on changes to the amount and scope of services provided, which are~~ reviewed periodically. ~~Fees for these services are billed by us and~~These fees were paid by our Former Parent and its non-U.S. affiliates in U.S. Dollars. ~~During~~For the ~~six months ended June 30,~~first half of 2019, we were paid approximately $0.9 million for these services. These administrative and transition services ~~have substantially~~ ended ~~with only a small portion expected to remain through the end of third quarter of 2019.~~in 2019, therefore, we earned no fees for these services in 2020. Our Former Parent’s non-U.S. affiliates have also provided, and continue to provide, certain shareholder services to ~~us.~~us under a service agreement.

Our gains and losses on sales of securities are derived from sales from our securities portfolio and are primarily dependent on changes in U.S. Treasury interest rates and asset liability management activities. Generally, as U.S. Treasury rates increase, our securities portfolio decreases in market value, and as U.S. Treasury rates decrease, our securities portfolio increases in value.

Our gains or losses on sales of property and equipment are recorded at the date of the sale and presented as other noninterest income or expense in the period they occur.

Noninterest Expense.Noninterest expense ~~includes,~~consists, among other ~~things:~~things of: (i) salaries and employee benefits; (ii) occupancy and equipment expenses; (iii) professional and other services fees; (iv) FDIC deposit and business insurance assessments and premiums; (v) telecommunication and data processing expenses; (vi) depreciation and amortization; and (vii) other operating expenses.

Salaries and employee benefits include compensation (including severance expenses), stock-based compensation, employee benefits and employer tax expenses for our personnel. Salaries and employee benefits are partially offset by the deferral of expenses directly related to the origination of loans. As mentioned in the “Net Interest Income” discussion above, non-refundable loan origination fees, net of direct costs of originating loans, are deferred and amortized over the life of the related loans as adjustments to interest income in accordance with U.S. GAAP.

Occupancy expense includes lease expense on our leased properties and other occupancy-related expenses. Equipment expense includes furniture, fixtures and equipment related expenses.

Professional and other services fees include legal, accounting and consulting fees, card processing fees, and other fees related to our business operations, and include ~~directors’~~director’s fees and stock-based compensation and regulatory agency fees, such as OCC examination ~~and application~~ fees.

FDIC deposit and business insurance assessments and premiums include deposit insurance, net of any credits applied against these premiums, corporate liability and other business insurance premiums.

Telecommunication and data processing expenses include expenses paid to our third-party data processing system providers and other telecommunication and data service providers.

Depreciation and amortization expense includes the value associated with the depletion of the value on our owned properties and equipment, including leasehold improvements made to our leased properties.

Other operating expenses include advertising, marketing (including ~~our current rebranding)~~rebranding expenses), community engagement and other operational expenses. Other operating expenses include the incremental cost associated with servicing the large number of shareholders resulting from ~~our~~the spin-off from our Former ~~Parent completed~~Parent. Other operating expenses are partially offset by other operating expenses directly related to the origination of loans, which are deferred and amortized over the life of the related loans as adjustments to interest income in ~~2018.~~accordance with U.S. GAAP.

Noninterest expenses generally increase as our business grows and whenever necessary to implement or enhance policies and procedures for regulatory compliance. During the first ~~six months~~half of 2020 and 2019, we incurred ~~approximately~~ ~~$3.7 million~~ of restructuring expenses ~~which~~of approximately $1.7 million and $3.7 million, respectively. In the first half of 2020, restructuring expenses included ~~$0.9~~$0.4 million and $1.3 million of staff ~~realignment~~reduction costs and digital transformation expenses, respectively ($0.9 million and $2.8 million of staff reduction costs and rebranding ~~expenses.~~costs in the first half of 2019, respectively). Restructuring expenses consist of those incurred for actions designed to implement the Company’s strategy as a new independent company. These actions include, but are not limited to reductions in workforce, streamlining operational processes, rolling out the Amerant brand, implementation of new technology system applications, enhanced sales tools and training, expanded product offerings and improved customer analytics to identify opportunities.

Primary Factors Used to Evaluate Our Financial Condition

The primary factors we use to evaluate and manage our financial condition include asset quality, capital and liquidity.

Asset Quality. We manage the diversification and quality of our assets based upon factors that include the level, distribution and risks in each category of assets. Problem assets may be categorized as classified, delinquent, nonaccrual, nonperforming and restructured assets. We also manage the adequacy of our allowance for loan losses, or the ~~allowance,~~ALL, the diversification and quality of loan and investment portfolios, the extent of counterparty risks, credit risk concentrations and other factors.

We review and update our ~~allowance~~ALL for loan loss model at least annually to better reflect our loan volumes, and credit and economic conditions in our markets. The model may differ among our loan segments to reflect their different asset types, and includes qualitative factors, which are updated semi-annually, based on the type of loan.

Capital. Financial institution regulators have established minimum capital ratios for banks and bank holding companies. We manage capital based upon factors that include: (i) the level and quality of capital and our overall financial condition; (ii) the trend and volume of problem assets; (iii) the adequacy of reserves; (iv) the level and

quality of earnings; (v) the risk exposures in our balance sheet under various scenarios, including stressed conditions; (vi) the Tier 1 capital ratio, the total capital ratio, the Tier 1 leverage ratio, and the CET1 capital ratio; and (vii) other factors, including market conditions.

Liquidity. Our deposit base consists primarily of personal and commercial accounts maintained by individuals and businesses in our primary markets and select international core depositors. In recent years, we have increased our fully-insured brokered time deposits under ~~$250,000.~~$250,000, but remain focused on relationship-driven core deposits. We manage liquidity based upon factors that include the amount of core deposit relationships as a percentage of total deposits, the level of diversification of our funding sources, the allocation and amount of our deposits among deposit types, the short-term funding sources used to fund assets, the amount of non-deposit funding used to fund assets, the availability of unused funding sources, off-balance sheet obligations, the ~~lending pipeline, the~~ amount of cash and liquid securities we hold, the availability of assets readily convertible into cash without undue loss, the characteristics and maturities of our assets when compared to the characteristics of our liabilities and other factors.

~~Performance Highlights~~Summary Results

~~Performance highlights~~The summary results for the ~~three months~~quarter ended June 30, ~~2019~~2020 include the following ~~(See~~(See “Selected Financial Information” for an explanation of ~~non-GAAP financial measures)~~Non-GAAP Financial Measures Reconciliation):

Net loss of $15.3 million, compared to net income of $12.9 million in the ~~second quarter~~same period of ~~2019, 23.4% higher than the $10.4 million reported in the second quarter of 2018, and~~2019. The net loss compared to net income ~~of $25.9 million for the six months ended June 30, 2019, 30.6% higher than the $19.9 million reported in the six months ended June 30, 2018.~~

~~NIM was 2.92% in the second quarter of 2019, up from 2.77% in the second quarter of 2018. NIM was 2.94% for the first six months of 2019, up from 2.72%~~ in the same ~~period of 2018.~~

~~Credit quality remained strong. The Company released $1.4 million from the allowance~~quarter last year was primarily due to higher provision for loan losses in the second quarter of ~~2019, compared~~2020 and lower net interest income, offset by higher non-interest income and lower non-interest expenses. Operating income, which excludes provision for income tax, provision for loan losses or reversals and net gains on securities, increased to $21.6 million, up 53.8% from $14.0 million in the same period of 2019.

Net interest income (“NII”) was $46.3 million, down 13.9% from $53.8 million in the same period of 2019. Lower NII is attributed to a ~~$0.2 million provision~~decline in average yields on interest-earning assets, partially offset by higher average interest-earning asset balances and lower deposit and professional funding costs. Net interest margin (“NIM”) was 2.44% in the second quarter of ~~2018.~~2020, down from 2.92% in the second quarter 2019.

Credit quality remained sound and reserve coverage is strong despite recent developments associated with one large loan relationship. The Company continues to closely monitor the performance of its loan portfolio estimated to be impacted by the decline in business activity associated with the COVID-19 pandemic, and continues refining its estimated probable loss assumptions. The Company recorded a provision for loan losses of $48.6 million during the second quarter of 2020, compared to a release of $1.4 million during the second quarter of 2019. The ratio of ~~non-performing assets~~the ALL to total ~~assets~~loans was ~~0.41%~~2.04% as of June 30, 2020, up from 0.99% in the same period last year. In the second quarter of 2020, the ratio of loan charge-offs to average total loans remained at a low level of 0.13%, up from 0.11% in the second quarter of 2019.

Noninterest income was $19.8 million, up 39.6% from $14.1 million in the same period of 2019. The increase over the same quarter of 2019 ~~unchanged compared~~was primarily due to ~~June 30, 2018.~~higher net gains on the sale of securities in the second quarter of 2020.

Noninterest expense was $36.7 million, down 30.6% from $52.9 million in the second quarter of 2019. The year-over-year decline in noninterest expense was mainly driven by lower salaries and employee benefit expenses attributed to staff reductions completed in 2019 ~~up 0.5% compared~~and 2018, lower stock compensation expense in the second quarter of 2020, and the deferral of direct origination costs associated with the Small Business Administration (“SBA”)’s Paycheck Protection Program ("PPP") loans funded during the second quarter of 2020. Non-refundable loan origination fees, net of direct costs of originating loans, are deferred and amortized over the term of the related loans as adjustments to ~~$52.6~~interest income in accordance with generally accepted accounting principles (GAAP). Additionally, the Company had lower restructuring costs in the second quarter of 2020 related to Amerant’s transformation efforts. Adjusted noninterest expense was $35.4 million in the ~~same~~second quarter of 2018. Noninterest expenses include expenses associated with restructuring activities, including $3.7 million of staff reduction and rebranding costs in the six months ended June 30, 2019. We had non-tax deductible spin-off costs of $6.0 million in the same period of 2018. Adjusted noninterest expense was2020, down 29.4% from $50.2 million in the second quarter of ~~2019, up 1.5% from $49.4~~2019. Adjusted noninterest expense in the second quarter of 2020 excludes $1.3 million in restructuring expenses, compared $2.7 million in the same quarter ~~of 2018.~~

~~The launch of our new “Amerant” brand across all our major markets in April 2019.~~

~~Increased customer share of wallet, with sales of interest rate cap and swap products to commercial borrowing customers reaching a record high.~~last year.

The efficiency ratio was ~~76.80% (74.11%, as~~55.6% (53.6% adjusted for ~~rebranding and staff reduction costs) for the six months ended June 30, 2019,~~restructuring expenses), compared to ~~79.88% (75.43%, as~~77.9% (73.8% adjusted for ~~spin-off costs)~~restructuring expenses) for the corresponding period of ~~2018.~~2019. These improvements in the second quarter of 2020 are mainly attributed to the lower noninterest expenses driven by staff reductions, lower stock compensation expense, and the deferral of origination costs associated with PPP loans, as previously explained.

~~Announced~~Stockholders’ book value per common share increased to $19.69, up 1.8%, from $19.35 at December 31, 2019. Tangible book value per common share increased to $19.18, up 1.8% from $18.84 at December 31, 2019.

Completed the ~~redemption~~registered offering and sale of ~~$25.0~~$60.0 million senior notes, which bear interest at an annual rate of 5.75% and are due in 2025 (the “Senior Notes”), significantly expanding the Company’s ~~10.60% and 10.18% trust preferred securities and related junior subordinated debentures. When completed in September 2019, these actions will increase annual pretax net income~~available funding sources.

Total loans were $5.9 billion, up $127.9 million , or 2.2%, from $5.7 billion as of December 31, 2019. Total deposits were $6.0 billion, up $267.6 million, or 4.6% from $5.8 billion as of December 31, 2019. These increases are mainly driven by ~~approximately $2.6 million, and~~ the Company’s ~~capital ratios will continue to exceed regulatory minimums.~~

~~Added to the Russell 2000® Index in June, which is expected to bolster our recognition~~participation in the ~~capital markets, and among investors, including those tracking this index.~~PPP.

Selected Financial Information

The following table sets forth selected financial information derived from our unaudited interim consolidated financial statements for the three and six ~~months~~month periods ended June 30, ~~2019~~2020 and ~~2018~~2019 and as of June 30, ~~2019~~2020 and our audited consolidated financial ~~statement~~statements as of December 31, ~~2018.~~2019. These unaudited interim consolidated financial statements are not necessarily indicative of our results of operations for the year ending December 31, ~~2019~~2020 or any interim or future period or our financial position at any future date. The selected financial information should be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations and our unaudited interim consolidated financial statements and the corresponding notes included in this Form 10-Q.


	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
(in thousands)
Consolidated Balance Sheets
Total assets	$	7,926,826	$	8,124,347	$	8,130,723	$	7,985,399
Total investments	1,650,632		1,741,428		1,674,811		1,739,410
Total net loans (1)	5,755,351		5,858,413
Total gross loans (1)					5,872,271		5,744,339
Allowance for loan losses	57,404		61,762		119,652		52,223
Total deposits	5,819,381		6,032,686		6,024,702		5,757,143
Junior subordinated debentures (2)	118,110		118,110
Advances from the FHLB and other borrowings	1,125,000		1,166,000		1,050,000		1,235,000
Senior notes (2)					58,419		—
Junior subordinated debentures (3)					64,178		92,246
Stockholders' equity	806,368		747,418		830,198		834,701
Assets under management and custody (4)					1,715,804		1,815,848

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(in thousands, except per share amounts)

Consolidated Results of Operations
Net interest income $ 53,789
$ 53,989
$ 109,226
$ 106,622
(Reversal of) provision for loan losses (1,350 ) 150
(1,350 ) 150
Noninterest income 14,147
14,986
27,303
28,931
Noninterest expense 52,905
52,638
104,850
108,283
Net income 12,857
10,423
25,928
19,852
Effective income tax rate 21.51 % 35.61 % 21.50 % 26.80 %

Common Share Data (3)

Tangible stockholders' equity (book value) per common share (4) $ 18.18
$ 16.43
$ 18.18
$ 16.43
Basic earnings per common share $ 0.30
$ 0.25
$ 0.61
$ 0.47
Diluted earnings per common share $ 0.30
$ 0.25
$ 0.60
$ 0.47
Basic weighted average shares outstanding 42,466
42,489
42,610
42,489
Diluted weighted average shares outstanding (5) 42,819
42,489
42,865
42,489
Cash dividend declared per common share (6) —
—
—
$ 0.94



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(in thousands, except percentages and per share amounts)
Consolidated Results of Operations
Net interest income	$	46,323		$	53,789		$	95,552		$	109,226
Provision for (reversal of) loan losses	48,620			(1,350		)	70,620			(1,350		)
Noninterest income	19,753			14,147			41,663			27,303
Noninterest expense	36,740			52,905			81,607			104,850
Net (loss) income	(15,279		)	12,857			(11,897		)	25,928
Effective income tax rate	20.77		%	21.51		%	20.75		%	21.50		%

Common Share Data
Stockholders' book value per common share	$	19.69		$	18.66		$	19.69		$	18.66
Tangible stockholders' equity (book value) per common share (5)	$	19.18		$	18.18		$	19.18		$	18.18
Basic (loss) earnings per common share	$	(0.37	)	$	0.30		$	(0.28	)	$	0.61
Diluted (loss) earnings per common share (6)	$	(0.37	)	$	0.30		$	(0.28	)	$	0.60
Basic weighted average shares outstanding	41,720			42,466			41,953			42,610
Diluted weighted average shares outstanding (6)	41,720			42,819			41,953			42,865


	Three Months Ended June 30,						Six Months Ended June 30,				Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019		2018		2020			2019			2020			2019
(in thousands, except per share amounts and percentages)
Other Financial and Operating Data (7)

Profitability Indicators (%)
Net interest income / Average total interest earning assets (NIM) (8)	2.92		%	2.77		%	2.94	%	2.72	%	2.44		%	2.92		%	2.55		%	2.94		%
Net income / Average total assets (ROA) (9)	0.66		%	0.50		%	0.66	%	0.47	%
Net income / Average stockholders' equity (ROE) (10)	6.56		%	5.57		%	6.76	%	5.31	%
Net (loss) income / Average total assets (ROA) (9)											(0.75		)%	0.66		%	(0.30		)%	0.66		%
Net (loss) income / Average stockholders' equity (ROE) (10)											(7.21		)%	6.56		%	(2.82		)%	6.76		%

Capital Indicators
Capital Indicators (%)
Total capital ratio (11)	14.70		%	12.61		%	14.70	%	12.61	%	14.34		%	14.70		%	14.34		%	14.70		%
Tier 1 capital ratio (12)	13.85		%	11.67		%	13.85	%	11.67	%	13.08		%	13.85		%	13.08		%	13.85		%
Tier 1 leverage ratio (13)	11.32		%	9.87		%	11.32	%	9.87	%	10.39		%	11.32		%	10.39		%	11.32		%
Common equity tier 1 capital ratio (CET1) (14)	12.14		%	10.13		%	12.14	%	10.13	%	12.13		%	12.14		%	12.13		%	12.14		%
Tangible common equity ratio (15)	9.93		%	8.21		%	9.93	%	8.21	%	9.97		%	9.93		%	9.97		%	9.93		%

Asset Quality Indicators (%)
Non-performing assets / Total assets (16)	0.41		%	0.41		%	0.41	%	0.41	%	0.95		%	0.41		%	0.95		%	0.41		%
Non-performing loans / Total loans (1) (17)	0.56		%	0.56		%	0.56	%	0.56	%	1.32		%	0.56		%	1.32		%	0.56		%
Allowance for loan losses / Total non-performing loans (18)	175.28		%	201.55		%	175.28	%	201.55	%	154.87		%	175.28		%	154.87		%	175.28		%
Allowance for loan losses / Total loans (1) (18)											2.04		%	0.99		%	2.04		%	0.99		%
Net charge-offs / Average total loans (19)	0.11		%	0.16		%	0.11	%	0.07	%	0.13		%	0.11		%	0.11		%	0.11		%

Efficiency Indicators
Efficiency ratio (20)	77.87		%	76.31		%	76.80	%	79.88	%
Full-time-equivalent employees (FTEs)	839			940			839		940
Efficiency Indicators (% except FTE)
Noninterest expense / Average total assets											1.81		%	2.70		%	2.04		%	2.65		%
Salaries and employee benefits / Average total assets											1.06		%	1.74		%	1.27		%	1.71		%
Other operating expenses/ Average total assets (20)											0.75		%	0.96		%	0.77		%	0.95		%
Efficiency ratio (21)											55.60		%	77.87		%	59.47		%	76.80		%
Full-Time-Equivalent Employees (FTEs)											825			839			825			839

Adjusted Selected Consolidated Results of Operations and Other Data (21)
Adjusted Selected Consolidated Results of Operations and Other Data (5)
Adjusted noninterest expense	$	50,169		$	49,438		101,181		102,245		$	35,422		$	50,169		$	79,935		$	101,181
Adjusted net income	15,005			14,142			28,808		25,831
Adjusted earnings per common share (5)	0.35			0.33			0.68		0.61
Adjusted earnings per diluted common share (5)	0.35			0.33			0.67		0.61
Adjusted net income / Average total assets (Adjusted ROA) (8)	0.77		%	0.67		%	0.73	%	0.61	%
Adjusted net income / Average stockholders' equity (Adjusted ROE) (9)	7.66		%	7.56		%	7.51	%	6.91	%
Adjusted efficiency ratio (22)	73.84		%	71.68		%	74.11	%	75.43	%
Adjusted net (loss) income											(14,234		)	15,005			(10,572		)	28,808
Operating income											21,599			14,039			38,251			30,683
Adjusted basic (loss) earnings per common share											(0.34		)	0.35			(0.25		)	0.68
Adjusted (loss) earnings per diluted common share (6)											(0.34		)	0.35			(0.25		)	0.67
Adjusted net (loss) income / Average total assets (Adjusted ROA) (9)											(0.70		)%	0.77		%	(0.26		)%	0.73		%
Adjusted net (loss) income / Average stockholders' equity (Adjusted ROE) (10)											(6.72		)%	7.66		%	(2.51		)%	7.51		%
Adjusted noninterest expense / Average total assets											1.75		%	2.56		%	2.00		%	2.56		%
Adjusted salaries and employee benefits / Average total assets											1.05		%	1.69		%	1.26		%	1.69		%



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019

Adjusted other operating expenses/ Average total assets (20	0.70	%	0.87	%	0.74	%	0.88	%
Adjusted efficiency ratio (22)	53.61	%	73.84	%	58.26	%	74.11	%

__________________


(1)	~~Outstanding~~ Total gross loans are net of deferred loan fees and ~~costs and net of the allowance for loan losses. There were no loans held for sale at June 30, 2019 and December 31, 2018.~~costs.


(2)	~~In July 2019,~~During the second quarter of 2020, the Company ~~called $25.0~~completed a $60 million offering of ~~its 10.60%~~Senior Notes with a coupon rate of 5.75%. Senior Notes are presented net of direct issuance cost which is deferred and ~~10.18% trust preferred securities and related junior subordinated debentures, which will be redeemed by September 2019.~~ amortized over 5 years.

(3)

During the six months ended June 30, 2020, the Company redeemed $26.8 million of its 8.90% trust preferred securities. The ~~earnings per common share reflect~~Company simultaneously redeemed the October 2018 reverse stock split which reduced the number of outstanding shares of each class on a 1-for-3 basis. See Note 15 to the audited consolidation financial statements included in the Form 10-K for more details on the reverse stock split.junior subordinated debentures associated with these trust preferred securities.


(4)	Assets held for clients in an agency or fiduciary capacity which are not assets of the Company and therefore are not included in the consolidated financial statements.


(5)	This ~~Non-GAAP~~presentation contains adjusted financial information determined by methods other than GAAP. This adjusted financial information is reconciled to GAAP in “Non-GAAP Financial Measures Reconciliation” herein.

~~(5)~~

As of June 30, 2019, potential dilutive instruments included 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the Company’s IPO and 1,299 additional shares of restricted stock issued in January 2019. As of June 30, 2019, these 738,138 unvested shares of restricted stock were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding in the three and six months ended June 30, 2019, and had a dilutive effect in per share earnings for the three (not shown due to rounding) and six months ended June 30, 2019. We had no outstanding dilutive instruments as of any period prior to December 2018.


~~(6)~~	~~Special cash dividend of $40.0 million paid to our Former Parent in connection with the spin-off.~~

(6 ) As of June 30, 2020 and 2019 potential dilutive instruments consisted of unvested shares of restricted stock and restricted stock units mainly related to the Company’s IPO in 2018, totaling 491,360 and 789,652, respectively. As of June 30, 2020, potential dilutive instruments were not included in the diluted earnings per share computation because the Company reported a net loss and their inclusion would have an antidilutive effect. As of June 30, 2019, potential dilutive instruments were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect in per share earnings.


(7)	Operating data for the ~~three and~~ ~~six~~ ~~month~~ periods ~~ended June 30, 2019 and 2018~~presented have been annualized.


(8)	~~Net interest margin~~NIM is defined as net interest income divided by average interest-earning assets, which are loans, securities, deposits with banks and other financial assets which yield interest or similar income.


(9)	Calculated based upon the average daily balance of total assets.


(10)	Calculated based upon the average daily balance of stockholders’ equity.


(11)	Total stockholders’ equity divided by total risk-weighted assets, calculated according to the standardized regulatory capital ratio calculations.


(12)	Tier 1 capital divided by total risk-weighted assets.

(13)

Tier 1 capital divided by quarter to date average assets. Tier 1 capital is composed of Common Equity Tier 1 (CET 1) capital plus outstanding qualifying trust preferred securities of $62.3 million and $114.1 million at June 30, ~~2019~~2020 and ~~2018~~. ~~$25.0 million of these~~2019, respectively. See footnote 2 for more information about trust preferred securities ~~will be redeemed by September 2019. See footnote 2.~~redemption transactions in the first quarter of 2020.


(14)	Common Equity Tier 1 (CET 1) capital divided by total risk-weighted assets.


(15)	Tangible common equity is calculated as the ratio of common equity less goodwill and other intangibles divided by total assets less goodwill and other intangible assets. Other intangibles assets are included in other assets in the Company’s consolidated balance sheets.

(16)

Non-performing assets include all accruing loans past due ~~more than~~ 90 days ~~and~~or more, all nonaccrual loans, restructured loans that are considered “troubled debt restructurings” or “TDRs”, and OREO properties acquired through or in lieu of foreclosure. Non-performing assets were ~~$32.8~~$77.3 million and ~~$35.3~~$32.8 million as of June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.


(17)	Non-performing loans include all accruing loans 90 days or more past due, ~~by more than 90 days, and~~ all nonaccrual ~~loans.~~loans and restructured loans that are considered TDRs. Non-performing loans were ~~$32.8~~$77.3 million and ~~$34.7~~$32.8 million as of June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.


(18)	Allowance for loan losses was ~~$57.4~~$119.7 million and ~~$69.9~~$57.4 million as of June 30, 2020 and 2019, ~~and 2018,~~ respectively. See Note 5 to our audited consolidated financial statements in our Form 10-K and Note 45 to these unaudited interim consolidated financial statements for more details on our impairment models.


(19)	Calculated based upon the average daily balance of outstanding loan principal balance net of deferred loan fees and costs, excluding the allowance for loan losses.


(20)	Other operating expenses is the result of total noninterest expense less salary and employee benefits.


(21)	Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and net interest income.


~~(21)~~	~~This presentation contains adjusted financial information, including adjusted noninterest expenses and the other adjusted items shown, determined by methods other than GAAP. This~~ ~~adjusted financial information is reconciled to GAAP in “Non-GAAP Financial Measures Reconciliation.”~~


(22)	Adjusted efficiency ratio is the efficiency ratio less the effect of restructuring ~~and spin-off~~ costs, described in “Non-GAAP Financial Measures ~~Reconciliation.”~~Reconciliation” herein.

Non-GAAP Financial Measures Reconciliation

Certain financial measures and ratios contained in this Form 10-Q, including “adjusted noninterest expense”, “adjusted net (loss) income”, “operating income”, “adjusted earnings per share (basic and diluted)”, “adjusted return on assets (ROA)”, “adjusted return on equity (ROE)”, and other ratios appearing in the tables below are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted

accounting principles (“GAAP”). The ~~following table sets forth selected~~Company refers to these financial ~~information~~measures and ratios as “non-GAAP financial measures.” The Company’s Non-GAAP financial measures are derived from the Company’s interim unaudited consolidated financial statements, adjusted for certain costs incurred by the Company in the periods presented related to tax deductible restructuring costs.

We use certain non-GAAP financial measures, including those mentioned above, both to explain our results to shareholders and ~~non-deductible spin-off costs. The Company~~the investment community and in the internal evaluation and management of our businesses. Our management believes that these ~~adjusted numbers~~non-GAAP financial measures and the information they provide are useful to ~~understand~~investors since these measures permit investors to view our performance using the same tools that our management uses to evaluate our past performance and prospects for future performance, especially in light of the additional costs we have incurred in connection with the Company’s restructuring activities that began in 2018 and continued into 2020, and the Company’s increases of its allowance for loan losses and net gains on sales of securities in the three and six months ended June 30, 2020. While we believe that these non-GAAP financial measures are useful in evaluating our performance, ~~absent~~this information should be considered as supplemental and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these ~~transactions and events.~~non-GAAP financial measures may differ from similar measures presented by other companies.

The following table sets forth the Company’s Non-GAAP financial measures.

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share amounts and percentages)
2019 2018 2019 2018
Total noninterest expenses $ 52,905
$ 52,638
$ 104,850
$ 108,283
Less: restructuring costs (1):
Staff reduction costs 907
—
907
—
Rebranding costs 1,829
—
2,762
—
Total restructuring costs 2,736
—
3,669
—
Less spin-off costs:
Legal fees —
2,000
—
3,000
Additional contribution to non-qualified deferred compensation plan on behalf of participants to mitigate tax effects of unexpected early distribution due to spin-off (2) —
1,200
—
1,200
Accounting and consulting fees —
—
—
1,294
Other expenses —
—
—
544
Total spin-off costs —
3,200
—
6,038
Adjusted noninterest expenses $ 50,169
$ 49,438
$ 101,181
$ 102,245



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share amounts)	2020			2019			2020			2019
Total noninterest expenses	$	36,740		$	52,905		$	81,607		$	104,850
Less: restructuring costs (1):
Staff reduction costs	360			907			414			907
Digital transformation expenses	958			—			1,258			—
Rebranding costs	—			1,829			—			2,762
Total restructuring costs	1,318			2,736			1,672			3,669
Adjusted noninterest expenses	$	35,422		$	50,169		$	79,935		$	101,181

Net (loss) income	$	(15,279	)	$	12,857		$	(11,897	)	$	25,928
Plus after-tax restructuring costs:
Restructuring costs before income tax effect	1,318			2,736			1,672			3,669
Income tax effect	(273		)	(588		)	(347		)	(789		)
Total after-tax restructuring costs	1,045			2,148			1,325			2,880
Adjusted net (loss) income	$	(14,234	)	$	15,005		$	(10,572	)	$	28,808

Net (loss) income	$	(15,279	)	$	12,857		$	(11,897	)	$	25,928
Plus: income tax (benefit) expense	(4,005		)	3,524			(3,115		)	7,101
Plus: provision for (reversal of) loan losses	48,620			(1,350		)	70,620			(1,350		)
Less: securities gains, net	7,737			992			17,357			996
Operating income	$	21,599		$	14,039		$	38,251		$	30,683

Basic (loss) earnings per share	$	(0.37	)	$	0.30		$	(0.28	)	$	0.61
Plus: after tax impact of restructuring costs	0.03			0.05			0.03			0.07
Total adjusted basic (loss) earnings per common share	$	(0.34	)	$	0.35		$	(0.25	)	$	0.68

Diluted (loss) earnings per share (2)	$	(0.37	)	$	0.30		$	(0.28	)	$	0.60
Plus: after tax impact of restructuring costs	0.03			0.05			0.03			0.07
Total adjusted diluted (loss) earnings per common share	$	(0.34	)	$	0.35		$	(0.25	)	$	0.67

Net income $ 12,857
$ 10,423
$ 25,928
$ 19,852
Plus after-tax restructuring costs:
Restructuring costs before income tax effect 2,736
—
3,669
—
Income tax effect (588 ) —
(789 ) —
Total after-tax restructuring costs 2,148
—
2,880
—
Plus after-tax total spin-off costs:
Total spin-off costs before income tax effect —
3,200
—
6,038
Income tax effect (3) —
519
—
(59 )
Total after-tax spin-off costs —
3,719
—
5,979
Adjusted net income $ 15,005
$ 14,142
$ 28,808
$ 25,831

Basic earnings per share $ 0.30
$ 0.25
$ 0.61
$ 0.47
Plus: after tax impact of restructuring costs 0.05
—
0.07
—
Plus: after tax impact of total spin-off costs —
0.08
—
0.14
Total adjusted basic earnings per common share $ 0.35
$ 0.33
$ 0.68
$ 0.61

Diluted earnings per share (4) $ 0.30
$ 0.25
$ 0.60
$ 0.47
Plus: after tax impact of restructuring costs 0.05
—
0.07
—
Plus: after tax impact of total spin-off costs —
0.08
—
0.14
Total adjusted diluted earnings per common share $ 0.35
$ 0.33
$ 0.67
$ 0.61


	Three months ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share amounts and percentages)	2019			2018			2019			2018			2020			2019			2020			2019
Net income / Average total assets (ROA)	0.66		%	0.50		%	0.66		%	0.47		%
Net (loss) income / Average total assets (ROA)													(0.75		)%	0.66		%	(0.30		)%	0.66		%
Plus: after tax impact of restructuring costs	0.11		%	—		%	0.07		%	—		%	0.05		%	0.11		%	0.04		%	0.07		%
Plus: after tax impact of total spin-off costs	—		%	0.17		%	—		%	0.14		%
Adjusted net income / Average total assets (Adjusted ROA)	0.77		%	0.67		%	0.73		%	0.61		%
Adjusted net (loss) income / Average total assets (Adjusted ROA)													(0.70		)%	0.77		%	(0.26		)%	0.73		%

Net income / Average stockholders' equity (ROE)	6.56		%	5.57		%	6.76		%	5.31		%
Net (loss) income / Average stockholders' equity (ROE)													(7.21		)%	6.56		%	(2.82		)%	6.76		%
Plus: after tax impact of restructuring costs	1.10		%	—%			0.75		%	—		%	0.49		%	1.10		%	0.31		%	0.75		%
Plus: after tax impact of total spin-off costs	—		%	1.99		%	—		%	1.60		%
Adjusted net income / Stockholders' equity (Adjusted ROE)	7.66		%	7.56		%	7.51		%	6.91		%
Adjusted net (loss) income / Average stockholders' equity (Adjusted ROE)													(6.72		)%	7.66		%	(2.51		)%	7.51		%

Noninterest expense / Average total assets													1.81		%	2.70		%	2.04		%	2.65		%
Less: impact of restructuring costs													(0.06		)%	(0.14		)%	(0.04		)%	(0.09		)%
Adjusted Noninterest expense / Average total assets													1.75		%	2.56		%	2.00		%	2.56		%

Salaries and employee benefits / Average total assets													1.06		%	1.74		%	1.27		%	1.71		%
Less: impact of restructuring costs													(0.01		)%	(0.05		)%	(0.01		)%	(0.02		)%
Adjusted salaries and employee benefits / Average total assets													1.05		%	1.69		%	1.26		%	1.69		%

Other operating expenses / Average total assets													0.75		%	0.96		%	0.77		%	0.95		%
Less: impact of restructuring costs													(0.05		)%	(0.09		)%	(0.03		)%	(0.07		)%
Adjusted other operating expenses / Average total assets													0.70		%	0.87		%	0.74		%	0.88		%

Efficiency ratio	77.87		%	76.31		%	76.80		%	79.88		%	55.60		%	77.87		%	59.47		%	76.80		%
Less: impact of restructuring costs	(4.03		)%	—%			(2.69		)%	—		%	(1.99		)%	(4.03		)%	(1.21		)%	(2.69		)%
Less: impact of total spin-off costs	—		%	(4.63		)%	—		%	(4.45		)%
Adjusted efficiency ratio	73.84		%	71.68		%	74.11		%	75.43		%	53.61		%	73.84		%	58.26		%	74.11		%

Stockholders' equity	$	806,368		$	719,382		$	806,368		$	719,382		$	830,198		$	806,368		$	830,198		$	806,368
Less: goodwill and other intangibles	(20,969		)	(21,114		)	(20,969		)	(21,114		)	(21,653		)	(20,969		)	(21,653		)	(20,969		)
Tangible common stockholders' equity	$	785,399		$	698,268		$	785,399		$	698,268		$	808,545		$	785,399		$	808,545		$	785,399
Total assets	7,926,826			8,530,464			7,926,826			$	8,530,464		$	8,130,723		$	7,926,826		$	8,130,723		$	7,926,826
Less: goodwill and other intangibles	(20,969		)	(21,114		)	(20,969		)	(21,114		)	(21,653		)	(20,969		)	(21,653		)	(20,969		)
Tangible assets	$	7,905,857		$	8,509,350		$	7,905,857		$	8,509,350		$	8,109,070		$	7,905,857		$	8,109,070		$	7,905,857
Common shares outstanding	43,205			42,489			43,205			42,489			42,159			43,205			42,159			43,205
Tangible common equity ratio	9.93		%	8.21		%	9.93		%	8.21		%	9.97		%	9.93		%	9.97		%	9.93		%
Stockholders' book value per common share													$	19.69		$	18.66		$	19.69		$	18.66
Tangible stockholders' book value per common share	$	18.18		$	16.43		$	18.18		$	16.43		$	19.18		$	18.18		$	19.18		$	18.18

_________

(1) Expenses incurred for actions designed to implement the Company’s strategy as a new independent company. These actions include, but are not limited to ~~costs associated with~~ reductions in workforce, streamlining operational processes, rolling out the Amerant brand, implementation of new technology system applications, enhanced sales tools and training, expanded product offerings and improved customer analytics to identify opportunities.

(2) ~~The spin-off caused an unexpected early distribution for U.S. federal income tax purposes from our deferred compensation plan. This distribution was taxable~~As of June 30, 2020 and 2019 potential dilutive instruments consisted of unvested shares of restricted stock and restricted stock units mainly related to ~~plan participants as ordinary income during 2018. We partially compensated plan participants,~~the Company’s IPO in 2018, totaling 491,360 and 789,652, respectively. As of June 30, 2020, potential dilutive instruments were not included in the ~~aggregate amount of $1.2 million, for~~diluted earnings per share computation because the ~~higher tax expense they incurred as~~Company reported a ~~result of the distribution increasing the plan participants' estimated effective federal income tax rates by recording a contribution to the plan on behalf of its participants. The after tax~~ net ~~effect of this $1.2 million contribution for the period ended June 30, 2018, was approximately $952,000. As a result of the early taxable distribution to plan participants, we expensed~~loss and ~~deducted for federal income tax purposes, previously deferred compensation of approximately $8.1 million, resulting in~~their inclusion would have an ~~estimated tax credit of $1.7 million, which exceeded the amount of the tax gross-up paid to plan participants.~~

~~(3)~~

Calculated based upon the estimated annual effective tax rate for the periods, which excludes the tax effect of discrete items, and the amounts that resulted from the permanent difference between spin-off costs that are non-deductible for Federal and state income tax purposes, and total spin-off costs recognized in the consolidated financial statements. The estimated annual effective rate applied for the calculation differs from the reported effective tax rate since it is based on a different mix of statutory rates applicable to these expenses and to the rates applicable to the Company and its subsidiaries.

~~(4)~~ anti-dilutive effect. As of June 30, 2019, potential dilutive instruments included 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the Company’s IPO and 1,299 additional shares of restricted stock issued in January 2019. As of June 30, 2019, these 738,138 unvested shares of restricted stock were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, such awards resulted in higher diluted weighted average shares outstanding ~~to be higher~~ than basic weighted average shares outstanding, ~~in the three and six months ended June 30, 2019,~~ and had a dilutive effect in per share ~~earnings in the three (not shown due to rounding) and six months ended June 30, 2019. We had no outstanding dilutive instruments as of any period prior to December 31, 2018.~~earnings.

Results of Operations - Comparison of Results of Operations for the Three and Six Month Periods Ended June 30, ~~2019~~2020 and ~~2018~~2019

Net (loss) income

The table below sets forth certain results of operations data for the three and six ~~months~~month periods ended June 30, ~~2019~~2020 and ~~2018:~~2019:

Three Months Ended June 30, Change Six Months Ended June 30, Change
(in thousands, except per share amounts and percentages) 2019 2018 2019 vs 2018 2019 2018 2019 vs 2018
Net interest income $ 53,789
$ 53,989
$ (200 ) (0.4 )% $ 109,226
$ 106,622
$ 2,604
2.4 %
(Reversal of) provision for loan losses (1,350 ) 150
(1,500 ) N/M
(1,350 ) 150
(1,500 ) N/M
Net interest income after (reversal of) provision for loan losses 55,139
53,839
1,300
2.4 % 110,576
106,472
4,104
3.9 %
Noninterest income 14,147
14,986
(839 ) (5.6 )% 27,303
28,931
(1,628 ) (5.6 )%
Noninterest expense 52,905
52,638
267
0.5 % 104,850
108,283
(3,433 ) (3.2 )%
Net income before income tax 16,381
16,187
194
1.2 % 33,029
27,120
5,909
21.8 %
Income tax (3,524 ) (5,764 ) 2,240
(38.9 )% (7,101 ) (7,268 ) 167
(2.3 )%
Net income $ 12,857
$ 10,423
$ 2,434
23.4 % $ 25,928
$ 19,852
$ 6,076
30.6 %
Basic earnings per common share $ 0.30
$ 0.25
$ 0.05
20.0 % $ 0.61
$ 0.47
$ 0.14
29.8 %
Diluted earnings per common share(1) $ 0.30
$ 0.25
$ 0.05
20.0 % $ 0.60
$ 0.47
$ 0.13
27.7 %



	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
(in thousands, except per share amounts and percentages)	2020			2019			2020 vs 2019					2020			2019			2020 vs 2019
Net interest income	$	46,323		$	53,789		$	(7,466	)	(13.9	)%	$	95,552		$	109,226		$	(13,674	)	(12.5	)%
Provision for (reversal of) loan losses	48,620			(1,350		)	49,970			N/M		70,620			(1,350		)	71,970			N/M
Net interest income (loss) after provision for (reversal of) loan losses	(2,297		)	55,139			(57,436		)	(104.2	)%	24,932			110,576			(85,644		)	(77.5	)%
Noninterest income	19,753			14,147			5,606			39.6	%	41,663			27,303			14,360			52.6	%
Noninterest expense	36,740			52,905			(16,165		)	(30.6	)%	81,607			104,850			(23,243		)	(22.2	)%
(Loss) income before income tax	(19,284		)	16,381			(35,665		)	(217.7	)%	(15,012		)	33,029			(48,041		)	(145.5	)%
Income tax benefit (expense)	4,005			(3,524		)	7,529			(213.7	)%	3,115			(7,101		)	10,216			(143.9	)%
Net (loss) income	$	(15,279	)	$	12,857		$	(28,136	)	(218.8	)%	$	(11,897	)	$	25,928		$	(37,825	)	(145.9	)%
Basic (loss) earnings per common share	$	(0.37	)	$	0.30		$	(0.67	)	(223.3	)%	$	(0.28	)	$	0.61		$	(0.89	)	(145.9	)%
Diluted (loss) earnings per common share (1)	$	(0.37	)	$	0.30		$	(0.67	)	(223.3	)%	$	(0.28	)	$	0.60		$	(0.88	)	(146.7	)%

__________________

(1)

At June 30, 2020 and 2019,, potential dilutive instruments ~~consist~~consisted of ~~738,138~~ unvested shares of restricted ~~stock. We had no outstanding dilutive instruments at June 30, 2018.~~ stock and restricted stock units totaling491,360 and 789,652, respectively, mainly related to the Company’s IPO in 2018. See Note 1417 to our unaudited interim financial statements in this Form 10-Q for details on the dilutive effects of the issuance of restricted stock and restricted stock units on earnings per share for the three and six ~~months~~ month periods ended June 30, ~~2019~~.2020 and 2019.

N/M ~~Not~~Means not meaningful

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

~~Net~~In the second quarter of 2020, we reported a net loss of $15.3 million, or $0.37 loss per share, compared to a net income of $12.9 million, or $0.30 earnings per diluted share, in ~~the three months ended June 30, 2019 represents an increase of $2.4 million, or 23.4% compared to~~ the same quarter of ~~2018. Higher~~2019. The decrease of $28.1 million, or 218.8%, in net income ~~during the three months ended June 30, 2019~~ was mainly the result of: (i) the ~~$1.4~~$48.6 million ~~reversal of~~ provision for loan losses in the second quarter of ~~2019,~~2020, primarily due to the estimated probable losses reflecting deterioration of our loan portfolio due to the COVID-19 pandemic and specific reserves requirements on a commercial loan relationship, and (ii) ~~no non-deductible spin off costs in the second quarter of 2019, and a normalized~~ lower ~~tax rate of 21.51%. These results were~~net interest income. This was partially offset by: (i) lower noninterest ~~income;~~expenses mainly due to lower salaries and employee benefits and lower other operating expenses, and (ii) higher noninterest ~~expenses~~income driven by ~~rebranding expenses and staff reduction costs related to our various restructuring activities and an additional compensation expense~~$7.5 million of ~~$1.5 million~~net gains on the sale of securities recognized in ~~connection with~~ the ~~amortization~~second quarter of ~~restricted stock awards granted in December 2018 and January 2019; and (iii) lower net interest income.~~2020.

Net interest income declined ~~from $54.0~~to $46.3 million in the three months ended June 30, ~~2018, to~~2020 from $53.8 million in the three months ended June 30, 2019. The ~~slight~~ decrease of ~~$0.2~~$7.5 million, or ~~0.4%~~13.9%, was primarily due to ~~higher cost of time deposits. We expect that the costs of new deposits and income on loans and new variable rate investments may decrease with the~~a decline in ~~market interest rates. Changes in~~average yields on interest-earning assets. This was partially offset by higher average interest-earning asset balances and lower deposit ~~rates may also lag the change in interest rates on our loans~~ and ~~investments.~~professional funding costs.

Noninterest income ~~decreased $0.8~~increased to $19.8 million in the three months ended June 30, ~~2019 compared to the same period one year ago, mainly due to lower income~~2020 from ~~brokerage, advisory and fiduciary activities, lower fees from administrative and transition services to our Former Parent, and the $0.9~~$14.1 million gain realized in the second quarter of 2018 related to the early termination of advances from the FHLB. This was partially offset by a $1.0 million gain on the sale of municipal bonds in the second quarter of 2019.

~~Noninterest expenses increased $0.3 million, or 0.5%,~~ in the three months ended June 30, ~~2019 compared~~2019. The increase of $5.6 million, or 39.6%, is mainly due to $7.5 million of net gains on the sale of 30-year Treasury securities recognized in the second quarter of 2020, in addition to higher other noninterest income and higher brokerage, advisory and fiduciary fees. These results were partially offset by: (i) lower cards and trade finance servicing fees; (ii) lower deposits and service fees and (iii) the absence of data processing and fees for other services previously provided to the ~~same period one year ago, mainly as a result~~Company’s Former Parent and its affiliates.

Noninterest expenses decreased to $36.7 million in the three months ended June 30, 2020 from $52.9 million in the three months ended June 30, 2019. The decrease of ~~higher other operating expenses~~$16.2 million, or 30.6%, is primarily driven ~~by rebranding and staff reduction expenses. This was partially offset by lower professional and other services fees as well as~~by: (i) lower salaries and employee benefits, mainly driven by staff reductions in 2018 and 2019, lower stock-based compensation expense and, the deferral of $7.8 million of expenses directly related to origination of loans under the PPP program in accordance with GAAP, and (ii) lower other operating expenses mainly due to ~~no spin-off~~the absence of rebranding costs in the second quarter of 2019. The decrease in salaries and employee benefits were partially offset by an additional compensation expense of $1.5 million in connection with restricted stock awards granted in December 2018 and January 2019 and higher staff reduction costs.2020. In the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, noninterest expense included $1.3 million and $2.7 million, respectively, in restructuring costs, consisting primarily of ~~rebranding and~~ staff reduction costs and ~~$3.2 million~~digital transformation expenses in ~~spin-off~~the three months ended June 30, 2020, and staff reduction and rebranding costs ~~respectively.~~in the three months ended June 30, 2019. The Company did not implement any staffing changes in the three months ended June 30, 2020 related to the COVID-19 pandemic.

Adjusted net ~~income~~loss for the ~~quarter~~three months ended June 30, ~~2019~~2020 was $14.2 million compared to an adjusted net income of $15.0 million ~~6.1% higher than~~in the ~~same quarter one year ago.~~three months ended June 30, 2019. Adjusted net (loss) income excludes restructuring costs of $1.3 million and $2.7 million in the three months ended June 30, 2020 and 2019, ~~and spin-off costs of $3.2~~respectively. Operating income increased to $21.6 million in the ~~same period one year ago.~~three months ended June 30, 2020 compared to $14.0 million in the three months ended June 30, 2019. Operating income excludes provisions for loan losses or reversals, net gains on securities and income tax expense or benefit. See “Non-GAAP Financial Measures Reconciliation” for a reconciliation of these non-GAAP financial measures to their U.S. GAAP counterparts.

Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

~~Net~~In the first half of 2020, we reported a net loss of $11.9 million, or $0.28 loss per share, compared to net income of $25.9 million, or ~~$0.61~~$0.60 earnings per diluted share, in ~~the six months ended June 30, 2019 represents an increase of $6.1 million, or 30.6%, compared to~~ the same period of ~~2018. Higher~~2019. The decrease of $37.8 million, or 145.9%, in net income ~~during the six months ended June 30, 2019~~ was mainly the result of: (i) ~~increased net interest income driven by higher yields, (ii) a $1.4~~the $70.6 million ~~reversal of~~ provision for loan losses in the first half of ~~2019~~2020, primarily due to the estimated probable losses reflecting deterioration of our loan portfolio due to the COVID-19 pandemic and ~~(iii)~~specific reserves requirements on a commercial loan relationship and (ii) lower net interest income. This was partially offset by: (i) lower noninterest expenses mainly due to lower salaries and employee benefits and lower other operating expenses, and (ii) higher noninterest income driven by ~~no spin-off costs during~~an increase of $15.8 million in net gains on the sale of securities recognized in the first half of 2019. These results were partially offset by: (i) higher other operating expenses, mainly rebranding expenses (ii) an additional compensation expense of $3.0 million in connection with restricted stock awards granted in December 2018 and January 2019, (iii) staff reduction costs related2020 compared to ~~our various restructuring activities, and (iv) lower noninterest income mainly due to a decrease in brokerage, advisory and fiduciary fees.~~2019.

Net interest income ~~improved from $106.6~~declined to $95.6 million in the six months ended June 30, ~~2018, to~~2020 from $109.2 million in the six months ended June 30, ~~2019,~~2019. The decrease of $13.7 million, or 12.5%, was primarily due to a decline in average yields on interest-earning assets. This was partially offset by a decline in the average rate paid on total interest bearing liabilities, including total deposits, FHLB advances and trust preferred securities. The decrease in average rates paid on total interest bearing liabilities was partially offset by an increase in the average balance of ~~$2.6~~time deposits.

Noninterest income increased $14.4 million, or ~~2.4%~~52.6%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019, mainly due to an increase of $15.8 million in ~~market rates during~~net gains on the sale of securities in the first half of 2020 compared to the same period last year, higher brokerage, advisory and ~~remixing~~fiduciary fees and higher other noninterest income. These results were partially offset by: (i) lower cards and trade finance servicing fees; (ii) lower deposits and service fees; (iii) the absence of data processing and fees for other services previously provided to the Former Parent and its affiliates, and (iv) the absence of the ~~loan portfolio.~~$0.6 million gain on early extinguishment of FHLB advances in the first half of 2019.

Noninterest expenses decreased $23.2 million, or 22.2%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily driven by: (i) lower salaries and employee benefits, mainly driven by staff reductions in 2018 and 2019 and lower stock-based compensation expense, and the deferral of $7.8 million of expenses directly related to origination of loans under the PPP program in accordance with GAAP, and (ii) lower other operating expenses mainly due to the absence of rebranding costs in the first half of 2020 compared to the same period the previous year. In the six months ended June 30, 2020 and 2019, noninterest expense included $1.7 million and $3.7 million, respectively, in restructuring costs, consisting primarily of staff reduction costs and digital transformation expenses in the six months ended June 30, 2020, and staff reduction and rebranding costs in the six months ended June 30, 2019. The Company did not implement any staffing changes in the six months ended June 30, 2020 related to the COVID-19 pandemic.

Adjusted net loss for the six months ended June 30, 2020 was $10.6 million compared to an adjusted net income ~~decreased $1.6~~of $28.8 million in the same period of 2019. Adjusted net (loss) income excludes restructuring costs of $1.7 million and $3.7 million in the six months ended June 30, 2020 and 2019, ~~compared to the same period one year ago, primarily due to lower~~respectively. Operating income from brokerage, advisory and fiduciary activities, lower deposit and service fees, and lower fees from administrative and transition services to our Former Parent, all but one of which terminated by May 31, 2019. This was ~~partially offset by a $1.0~~$38.3 million ~~gain on the sale of municipal bonds in the second quarter of 2019.~~

~~Noninterest expenses decreased $3.4 million, or 3.2%, in~~for the six months ended June 30, ~~2019 compared to~~2020, up 24.7% from $30.7 million in the same period ~~one year ago. This was mainly the result of lower professional and other services fees as well as lower salaries and employee benefits primarily due to no spin-off costs in the first half~~ of 2019. ~~These results were partially offset by: (i) higher other operating expenses mainly due~~Operating income excludes provisions for loan losses or reversals, net gains on securities and income tax expense or benefit. See “Non-GAAP Financial Measures Reconciliation” for a reconciliation of these non-GAAP financial measures to rebranding, (ii) an additional compensation expense of $3.0 million in connection with restricted stock awards granted in December 2018 and January 2019, and (iii) staff reduction costs related to our various restructuring activities. In the six months ended June 30, 2019 and 2018, noninterest expense included $3.7 million in restructuring costs, consisting primarily of rebranding and staff reduction costs, and $6.0 million in spin-off costs, respectively.their U.S. GAAP counterparts.

Net interest income

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

In the ~~second quarter of 2019,~~three months ended June 30, 2020, we earned ~~$53.8~~$46.3 million of net interest income, a decline of ~~$0.2~~$7.5 million, or ~~0.4%~~13.9%, from ~~$54.0~~$53.8 million ~~of net interest income earned~~ in the same period of ~~2018.~~2019. The ~~slight~~ decrease in net interest income was primarily driven by a ~~6.2%~~91 basis point decline in the average yield on interest-earning assets resulting from the Federal Reserve decreasing the benchmark interest rate three times in 2019 plus the full effect of lower market rates on variable-rate loans following the emergency rate cuts implemented by the Federal Reserve during March 2020. These results were partially offset by: (i) a decrease of 50 basis points in average rates paid on total interest bearing liabilities mainly driven by lower costs of deposits and FHLB advances as well as lower interest expense due to the redemption of trust preferred securities in the third quarter of 2019 and first quarter of 2020 and (ii) a 3.2% increase in the average balance of interest-earning assets ~~and an increase of 33 basis points in average rates paid on interest bearing liabilities~~ mainly due to higher loan balances and higher cash balances at the higher cost of time deposits. This was partially offset by a 38 basis points improvement in the average yield on interest-earning assets mainly due to a higher yielding loan mix and a 7.6% decrease in average interest-bearing liabilities.Federal Reserve. Net interest margin ~~improved 15~~decreased 48 basis points to 2.44% in the three months ended June 30, 2020 from ~~2.77%~~2.92% in the three months ended June 30, 2019.

While the current COVID-19 pandemic interest rate environment and the potential runoff of the Company’s low-cost foreign deposits will continue to pressure NII and NIM, the Company is taking decisive action to manage these headwinds. Specifically, in the second quarter of ~~2018~~2020, the Company continued to ~~2.92% in the same period of 2019. The increase in the net interest margin was mainly driven by the Company’s continued focus on higher-yielding domestic relationship loans.~~

~~Our net interest income~~actively implement and NIM are expected to remain pressured as lower market interest rates are forecast for the rest of 2019. We expect that the costs of new deposits and income on loans may decrease with declining market interest rates. Changes in deposit rates may also lag the changes in interest rates on our loans and investments.

~~The Company continues taking steps to reduce NIM compression from declining market~~manage floor rates in the ~~coming quarters by establishing floors~~loan portfolio, aggressively reprice deposits, leverage low-cost wholesale funding opportunities, maximize high-yield investments, and seek to reduce asset sensitivity. Importantly, in April 2020, the Company modified maturities on ~~term sheets on new loan originations, decreasing rates on time deposits~~$420.0 million fixed-rate FHLB advances, resulting in 26 bps of annual savings for this portfolio representing an estimated $2.4 million of cost savings for the remainder of 2020. See — Capital Resources and ~~increasingly relying on pricing intelligence, focusing on relationship accounts~~Liquidity Management for detailed information. The Company will continue to ~~stabilize cost~~take steps to mitigate the current interest rate environment and continued runoff of ~~funds, rationalizing special rates paid to top customers, and shifting towards shorter-term professional funding.~~ foreign deposits.

On July ~~10,~~31, 2019 and September 7, 2019, the Company ~~announced the redemption~~redeemed all $10.0 million of its outstanding 10.18% trust preferred securities issued by its Commercebank Capital Trust III subsidiary (“Capital Trust III”), and all $15.0 million of its outstanding 10.60% trust preferred securities issued by its Commercebank Statutory Trust II subsidiary (“Statutory Trust II”)~~, and~~. On January 30, 2020, the Company redeemed all ~~$10.0~~$26.8 million of its outstanding ~~10.18%~~8.90% trust preferred capital securities issued by ~~its~~ Commercebank Capital Trust ~~III~~I (“Capital Trust ~~III”~~I”). These redemptions are expected to reduce the Company’s annual pretax interest expense by approximately ~~$2.6~~$5.0 million. See “—Capital Resources and Liquidity Management” for detailed information. Additionally, on August 8, 2019 the Company

entered into five interest rate swap contracts with notional amounts totaling $64.2 million, ~~which~~that were designed as cash flow hedges, ~~designated~~ to manage the exposure ~~to changes in~~of floating interest ~~rates in cash flows associated with~~payments on all of the Company’s variable-rate junior subordinated ~~debentures, and as a result, decrease its interest expense due to~~debentures. These cash flow hedges took advantage of the ~~currently~~ inverted yield ~~curve.~~curve to reduce the Company’s interest expense. The Company will continue to explore the use of hedging activities to manage its interest rate ~~exposure.~~risk.

Interest Income. Total interest income was ~~$79.2~~$64.2 million in the ~~second quarter of 2019~~three months ended June 30, 2020, compared to ~~$75.9~~$79.2 million for the same period of ~~2018.~~2019. The ~~$3.3~~$15.1 million, or ~~4.4%~~19.0%, ~~increase~~decline in total interest income was primarily due to ~~higher average~~a decline in yields ~~earned on~~of interest-earning assets ~~due~~as result of the aforementioned Federal Reserve’s reductions to ~~higher yielding loan mix. These improvements were~~the benchmark interest rate in 2019 plus the previously mentioned emergency rate cuts in March 2020. This was partially offset by ~~a decrease~~higher average balances of interest-earning assets driven by higher loan balances mainly due to PPP loans originated in ~~the average balance of loans, available for sale securities and interest earning deposits with other banks during~~ the second quarter of ~~2019 with respect to~~2020 and higher cash balances at the ~~same period of 2018.~~ Federal Reserve. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on loans in the ~~second quarter of 2019~~three months ended June 30, 2020 was ~~$66.8~~$53.5 million compared to ~~$62.4~~$66.8 million for the comparable period of ~~2018.~~2019. The ~~$4.4~~$13.3 million, or ~~7.0%~~19.9%, ~~increase~~decrease was primarily due to a 4498 basis point ~~increase~~decline in average ~~yields~~yields. This was partially offset by ~~a 4.2% decrease~~an increase of 1.3% in the average balance of loans in the second quarter of ~~2019~~2020 over the same period in ~~2018. In~~2019, mainly attributable to the PPP loans originated in the second quarter of ~~2019, the increase in average yields reflects the Company’s continued focus on higher-yielding domestic loans.~~ 2020. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on the available for sale debt securities ~~portfolio~~ decreased $0.9 million, or ~~8.4%~~8.7%, to ~~$10.3~~$9.3 million in the ~~second quarter of 2019~~three months ended June 30, 2020 compared to ~~$11.3~~$10.2 million in the same period of ~~2018.~~2019. This was mainly due to a 30 basis point decline ~~of 8.5%~~ in the average ~~volume of securities available for sale accompanied with a 2 basis points decrease in the average yields in~~yields. In the second quarter of ~~2019 with respect~~2020, prepayments on mortgage-related securities stabilized following a surge in expected prepayments during the first quarter of 2020. Still, we continued to focus on decreasing floating rate investments, given the ~~same~~current interest rate environment. As of the end of the second quarter of 2020, floating rate investments represented 16.9% of our portfolio, down from 17.9% in ~~2018.~~the year ago period. During the second quarter of ~~2019, we completed~~2020, the ~~sale of approximately $91.2~~Company purchased $53.0 million in ~~municipal bonds.~~higher yielding fixed-rate corporate debt, primarily in the subordinated financial institution sector.

Interest Expense. Interest expense on total interest-bearing liabilities ~~increased $3.5~~decreased $7.6 million, or ~~16.0%~~29.9%, to ~~$25.4~~$17.8 million in the ~~second quarter of 2019~~three months ended June 30, 2020 compared to ~~$21.9~~$25.4 million in the same period of ~~2018,~~2019, primarily due to ~~higher rates paid on total deposits, mainly time deposits, partially offset by~~ lower ~~average balances~~cost of ~~total~~ deposits and FHLB advances, ~~from~~as well as lower interest expense due to the ~~FHLB.~~aforementioned redemptions of trust preferred securities in 2019 and the first quarter of 2020.

Interest expense on deposits ~~increased~~decreased to ~~$17.1~~$14.1 million in the ~~second quarter of 2019~~three months ended June 30, 2020 compared to ~~$13.4~~$17.1 million for the same period of ~~2018.~~2019. The ~~$3.7~~$3.0 million, or ~~27.4%~~17.4%, ~~increase~~decrease was primarily due to a 3724 basis ~~points increase~~point decline in the average rates paid on deposits, ~~mainly due to higher cost of time deposits,~~ partially offset by ~~a lower~~higher average ~~balance of~~ total deposits, ~~which decreased 7.5%.~~primarily time deposits. Average total time deposits ~~decreased~~increased by ~~$56.5~~$169.6 million, or ~~2.4%~~7.3%, mainly as a result ~~our strategic decision to decrease the promotional interest rates we paid. We continue to focus~~of our efforts to ~~retain customers with higher probabilities of renewal at lower-than-market rates. Also, we have implemented a strategy for renewing customer’s certificates of~~capture online deposits. Average online deposits ~~(“CDs”) with lower probability of renewals through our promotions. As a result, we were able~~increased by $143.2 million, or 188.4%, to ~~renew approximately $211.2~~$219.2 million in ~~CDs~~the second quarter of 2020 compared to $76.0 million in the ~~first half~~second quarter of ~~2019 at rates that were~~2019. The increase in average time deposits was partially offset by lower ~~than the highest rates paid in our markets. Average~~average total checking and savings account balances which for the second quarter of 2020 decreased year-on-year by ~~$353.9~~$165.0 million, or ~~11.5%~~6.1%, primarily due to a decline of ~~$448.8~~$197.9 million, or ~~17.1%~~9.0%, in the average balance of international accounts, partially offset by higher average domestic customer deposits. The decline in average international accounts includes ~~$84.8~~a decrease of $213.2 million, or ~~21.0%~~11.5%, in personal accounts partially offset by an increase of $15.3 million, or 4.6%, in commercial ~~accounts and $364.0 million, or 16.4%, in personal~~ accounts. The overall decline in average balance of international commercial and personal accounts is primarily due to the continued utilization of deposits from our Venezuelan ~~resident~~ customers ~~spending their U.S. Dollar savings. As living~~to fund everyday expenses, as challenging conditions in ~~Venezuela remain difficult, those~~their country persist. In the second quarter of 2020, the pace of utilization of deposits from our Venezuelan customers ~~continued~~declined mainly due to ~~rely on~~lower economic activity in their ~~U.S. Dollar deposits~~country currently attributable to ~~fund daily living expenses.~~the COVID-19 pandemic.

Interest expense on FHLB advances and other borrowings decreased by ~~$0.2~~$3.2 million, or ~~3.4%~~50.6%, in the ~~second quarter of 2019 with respect~~three months ended June 30, 2020 compared to the same period of ~~2018. This was the~~2019, mainly as a result of a ~~8.6% decline in the average balance outstanding, partially offset by an increase~~decrease of 11127 basis points in the average rate paid on of these borrowings. This reduction in rates, includes the effect of the aforementioned $420 million in FHLB advances restructuring at the beginning of the second quarter of 2020. These results were

partially offset by an increase of $91.0 million, or 8.5%, in the average balance outstanding in the three months ended June 30, 2020 compared to the same period in 2019.

Interest expense on junior subordinated debentures decreased by $1.5 million, or 72.7%, in the three months ended June 30, 2020 compared to the same period last year, mainly driven by a decline of $53.9 million, or 45.7%, in the average balance outstanding in connection with the redemption of trust preferred securities issued by the Capital Trust III, Statutory Trust II, and Capital Trust I and related subordinated debt, previously discussed.

During the second quarter of 2020, we completed a $60.0 million offering of Senior Notes with a fixed-rate coupon of 5.75%. See “—Capital Resources and Liquidity Management” for detailed information.

Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

In the six months ended June 30, ~~2019,~~2020, we earned ~~$109.2~~$95.6 million of net interest income, ~~an increase~~a decline of ~~$2.6~~$13.7 million, or ~~2.4%~~12.5%, from ~~$106.6~~$109.2 million ~~of net interest income earned~~ in the same period of ~~2018.~~2019. The ~~increase~~decrease in net interest income was ~~due~~ primarily todriven by a 5168 basis ~~points improvement~~point decline in the average yield on interest-earning assets ~~due to an increase~~resulting from the Federal Reserve decreasing the benchmark interest rate three times in ~~market rates since the comparable period in 2018 and the changing mix~~2019 plus a full quarter of the ~~loan portfolio to include higher-rate domestic loans. Also, there was a 5.8% decrease~~repricing effect of the Federal Reserve's emergency rate cuts in ~~average interest-bearing liabilities.~~March 2020. These results were partially offset by a ~~5.04%~~ decrease of 32 basis points in average rates paid on total interest bearing liabilities mainly driven by lower costs of total deposits and FHLB advances, as well as lower interest expense due to the redemption of trust preferred securities in the third quarter of 2019 and first quarter of 2020. The decrease in average rates paid on total interest bearing liabilities was partially offset by an increase in the average balance of ~~interest-earning assets and an increase of 37 basis points in average rates paid.~~time deposits. Net interest margin ~~improved 22~~decreased 39 basis points ~~from 2.72%~~to 2.55% in the ~~first half of 2018 to~~three months ended June 30, 2020 from 2.94% in the ~~same period of~~three months ended June 30, 2019.

Interest Income. Total interest income was ~~$159.5~~$135.5 million in the ~~first half of 2019~~three months ended June 30, 2020, compared to ~~$147.8~~$159.5 million for the same period of ~~2018.~~2019. The ~~$11.7~~$24.1 million, or ~~7.9%~~15.1%, ~~increase~~decline in total interest income was primarily due to ~~higher average~~a decline in yields ~~earned on~~of interest-earning assets ~~due to an increase in market rates since the comparable period in 2018 and the changing mix~~as result of the loan portfolio to include higher-rate domestic loans. These improvements were partially offset by a decrease in the average balance of loans and available for sale securities during the first half of 2019 with respectaforementioned Federal Reserve’s reductions to the ~~same period of 2018.~~ benchmark interest rate in 2019 plus the previously mentioned emergency rate cuts in March 2020. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on loans in the six months ended June 30, ~~2019~~2020 was ~~$133.5~~$113.3 million compared to ~~$122.1~~$133.5 million for the comparable period of ~~2018.~~2019. The ~~$11.4~~$20.3 million, or ~~9.3%~~15.2%, ~~increase~~decrease was primarily due to a 5670 basis point ~~increase~~decline in average ~~yields, due to the increase in market rates and the aforementioned change in the loan portfolio mix, partially offset by~~yields. In addition, there was a ~~3.9%~~$31.5 million, or 0.6%, decrease in the average balance of loans in the first half of ~~2019~~2020 over the same period in ~~2018. In~~2019, mainly as a result of the ~~six months ended June 30,~~strategic run-off of foreign financial institution loans and non-relationship syndicated national credit loans. The decline in the average balance of loans in the first half of 2020 compared to the same period in 2019 was partially offset by PPP loans originated in the ~~increase in average yields reflects the Company’s continued focus on higher-yielding domestic loans.~~ second quarter of 2020. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on the available for sale debt securities portfolio decreased ~~$0.3~~$2.1 million, or ~~1.6%~~10.2%, to ~~$21.2~~$18.8 million in the six months ended June 30, ~~2019~~2020 compared to ~~$21.5~~$20.9 million in the same period of ~~2018.~~2019. This was mainly due to a ~~decline of 7.8% in the average volume of securities available for sale partially offset by an increase of 18~~34 basis ~~points~~point decline in the average yields, which includes the effect of the aforementioned surge in prepayments on mortgage-related securities in the first quarter of 2020. During the first half of ~~2019 with respect to~~2020, the ~~same period~~Company purchased $94.6 million in ~~2018.~~higher yielding fixed-rate corporate debt, primarily in the subordinated financial institution sector.

Interest Expense. Interest expense on total interest-bearing liabilities ~~increased $9.1~~decreased $10.4 million, or ~~22.0%~~20.6%, to ~~$50.3~~$39.9 million in the ~~first half of 2019~~six months ended June 30, 2020 compared to ~~$41.2~~$50.3 million in the same period of ~~2018,~~2019, primarily due to ~~higher yields on total~~lower cost of FHLB advances and deposits, ~~and higher average balance~~lower interest expense due to the aforementioned redemptions of ~~time deposits, partially offset by~~trust preferred securities, and lower average balances of total ~~checking~~interest-bearing liabilities. The decrease in average rates paid and ~~saving accounts and advances from~~average balances of total interest bearing liabilities was partially offset by an increase in the ~~FHLB.~~average balance of time deposits.

Interest expense on deposits ~~increased~~decreased to ~~$33.6~~$31.0 million in ~~the~~ the six months ended June 30, ~~2019~~2020 compared to ~~$24.8~~$33.6 million for the same period of ~~2018.~~2019. The ~~$8.9~~$2.7 million, or ~~35.8%~~7.9%, ~~increase~~decrease was primarily due to a 418 basis ~~points increase~~point

decline in the average rates paid on deposits and ~~a 1.9% increase in~~lower average ~~time~~total deposits. Lower average total deposits include lower checking and savings account balances partially offset by ~~lower average~~higher time deposits. Average total time deposits increased by $104.5 million, or 4.4%, mainly as a result of our efforts to capture online deposits. Average online deposits increased by $127.0 million, or 182.3%, to $196.6 million in the first half of 2020 compared to $69.6 million the same period in 2019. Average total checking and ~~saving~~savings account balances ~~which~~for the first half of 2020 decreased ~~11.0%. The increase of $44.4~~year-on-year by $218.7 million, or ~~1.9%~~7.9%, ~~in average time deposits was mainly the result of our 2018 promotions, where we sought longer-duration deposits~~primarily due to our expectations at that time for higher interest rates in the future and changing customer preferences as interest rates increased. This was partially offset by a decline in the rate of CD renewals in connection with the aforementioned strategic decrease in promotional interest rates. The decrease of $342.9 million, or 11.0%, in average total checking and saving account balances is primarily the result of a decline of ~~$452.9~~$263.6 million, or ~~16.9%~~11.7%, in the average balance of international accounts, partially offset by higher average domestic customer deposits. The decline in average international accounts includes ~~$85.2~~a decrease of $260.8 million, or ~~20.4%~~13.7%, in personal accounts and a decline of $2.8 million, or 0.8%, in commercial ~~accounts and $367.7 million, or 16.2%, in personal~~ accounts. The overall decline in average balance of international commercial and personal accounts is primarily due to the continued utilization of deposits from our Venezuelan ~~resident~~ customers ~~spending their U.S. Dollar savings. As living~~to fund everyday expenses, as challenging conditions in ~~Venezuela remain difficult, those~~their country persist. In the second quarter of 2020, the pace of utilization of deposits from our Venezuelan customers ~~continued~~declined mainly due to ~~rely on~~lower economic activity in their ~~U.S. Dollar deposits~~country currently attributable to ~~fund daily living expenses.~~the COVID-19 pandemic.

Interest expense on FHLB advances and other borrowings ~~was relatively unchanged~~decreased by $5.0 million, or 39.8%, in the six months ended June 30, ~~2019 with respect~~2020 compared to the same period of ~~2018. This was the~~2019, mainly as a result of a ~~7.9% decline in the average balance outstanding, partially offset by an increase~~decrease of 19104 basis points in the average rate paid on these borrowings. ~~Advances from~~This reduction in rates, includes the ~~FHLB are used to actively manage~~effect of the ~~Company’s funding profile by match funding CRE loans.~~aforementioned $420 million in FHLB advances ~~bear fixed~~restructuring at the beginning of the second quarter of 2020. These results were partially offset by an increase of $92.8 million, or 8.5% in the average balance outstanding compared to the previous year. In addition, in 2019 the Company terminated interest ~~rates from 1.50%~~rate swaps that had been designated as cash flow hedges to ~~3.86%~~manage interest rate exposure on FHLB advances. As a result, the Company recorded a credit of approximately $0.7 million against interest expense on FHLB advances in the first half of 2020 ($0.5 million in the first half of 2019) and expects to record a credit of approximately $0.7 million in the rest of 2020. See “—Capital Resources and Liquidity Management” for detailed information.

Interest expense on junior subordinated debentures decreased by $2.8 million, or 67.6%, ~~and variable interest rates based on 3-month LIBOR which increased to 2.32% at~~in the six months ended June 30, ~~2019 from 2.34% at June 30, 2018. At June 30, 2019, $845.0~~2020 compared to the same period last year, mainly driven by a decline of $49.5 million, ~~(75.1%)~~or 41.9%, in the average balance outstanding in connection with the redemption of ~~FHLB advances were fixed rate~~the trust preferred securities issued by Capital Trust III, Statutory Trust II, and ~~$280.0 million (24.9%) were variable rate.~~Capital Trust I and related subordinated debt, previously discussed.

Average Balance Sheet, Interest and Yield/Rate Analysis

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the three and six ~~months~~month periods ended June 30, ~~2019~~2020 and ~~2018.~~2019. The average balances for loans include both performing and ~~nonperforming~~non-performing balances. Interest income on loans includes the effects of discount accretion and the amortization of non-refundable loan origination fees, net ~~deferred~~of direct loan origination costs, accounted for as yield adjustments. Average balances represent the daily average balances for the periods presented.


	Three Months Ended June 30,														Three Months Ended June 30,
	2019							2018							2020							2019
(in thousands, except percentages)	Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates
Interest-earning assets:
Loan portfolio, net (1)	$	5,641,686		$	66,801	4.75	%	$	5,890,459		$	62,448	4.31	%	$	5,712,548		$	53,483	3.77	%	$	5,641,686		$	66,801	4.75	%
Securities available for sale (2)	1,522,280			10,314		2.72	%	1,662,799			11,257		2.74	%
Securities held to maturity (3)	82,728			506		2.45	%	88,811			346		1.57	%
Debt securities available for sale (2)															1,545,335			9,283		2.42	%	1,498,544			10,173		2.72	%
Debt securities held to maturity (3)															68,237			308		1.82	%	82,728			506		2.45	%
Equity securities with readily determinable fair value not held for trading															24,303			121		2.00	%	23,736			141		2.38	%
Federal Reserve Bank and FHLB stock	65,861			1,066		6.49	%	70,243			1,106		6.45	%	69,801			916		5.28	%	65,861			1,066		6.49	%
Deposits with banks	88,247			539		2.45	%	175,434			759		1.74	%	215,406			56		0.10	%	88,247			539		2.45	%
Total interest-earning assets	7,400,802			79,226		4.29	%	7,887,746			75,916		3.91	%	7,635,630			64,167		3.38	%	7,400,802			79,226		4.29	%
Total non-interest-earning assets less allowance for loan losses	466,318							531,294							512,569							466,318
Total assets	$	7,867,120						$	8,419,040						$	8,148,199						$	7,867,120

Interest-bearing liabilities:
Checking and saving accounts -
Interest bearing DDA	$	1,207,811		$	301	0.10	%	$	1,417,230		$	113	0.03	%	$	1,122,405		$	104	0.04	%	$	1,207,811		$	301	0.10	%
Money market	1,143,072			3,997		1.40	%	1,225,452			3,086		1.01	%	1,112,363			1,521		0.55	%	1,143,072			3,997		1.40	%
Savings	369,538			17		0.02	%	431,686			18		0.02	%	320,644			48		0.06	%	369,538			17		0.02	%
Total checking and saving accounts	2,720,421			4,315		0.64	%	3,074,368			3,217		0.42	%	2,555,412			1,673		0.26	%	2,720,421			4,315		0.64	%
Time deposits	2,314,614			12,740		2.21	%	2,371,147			10,172		1.73	%	2,484,219			12,406		2.01	%	2,314,614			12,740		2.21	%
Total deposits	5,035,035			17,055		1.36	%	5,445,515			13,389		0.99	%	5,039,631			14,079		1.12	%	5,035,035			17,055		1.36	%
Securities sold under agreements to repurchase	—			—		—	%	423			2		1.90	%	474			—		—	%	—			—		—	%
Advances from the FHLB and other borrowings (4)	1,071,978			6,292		2.35	%	1,173,000			6,511		2.24	%	1,163,022			3,110		1.08	%	1,071,978			6,292		2.35	%
Senior notes															5,136			84		6.58	%	—			—		—	%
Junior subordinated debentures	118,110			2,090		7.10	%	118,110			2,025		7.04	%	64,178			571		3.58	%	118,110			2,090		7.10	%
Total interest-bearing liabilities	6,225,123			25,437		1.64	%	6,737,048			21,927		1.31	%	6,272,441			17,844		1.14	%	6,225,123			25,437		1.64	%
Non-interest-bearing liabilities:
Non-interest bearing demand deposits															916,980							793,197
Accounts payable, accrued liabilities and other liabilities															106,738							62,677
Total non-interest-bearing liabilities	855,874							933,968							1,023,718							855,874
Total liabilities	7,080,997							7,671,016							7,296,159							7,080,997
Stockholders’ equity	786,123							748,024							852,040							786,123
Total liabilities and stockholders' equity	$	7,867,120						$	8,419,040						$	8,148,199						$	7,867,120
Excess of average interest-earning assets over average interest-bearing liabilities	$	1,175,679						$	1,150,698						$	1,363,189						$	1,175,679
Net interest income				$	53,789						$	53,989						$	46,323						$	53,789
Net interest rate spread						2.65	%						2.60	%						2.24	%						2.65	%
Net interest margin (5)						2.92	%						2.77	%						2.44	%						2.92	%
Ratio of average interest-earning assets to average interest-bearing liabilities	118.89		%					117.08		%					121.73		%					118.89		%


	Six Months Ended June 30,														Six Months Ended June 30,
	2019							2018							2020							2019
(in thousands, except percentages)	Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates
Interest-earning assets:
Loan portfolio, net (1)	$	5,674,606		$	133,523	4.74	%	$	5,902,893		$	122,118	4.18	%	$	5,643,088		$	113,271	4.04	%	$	5,674,606		$	133,523	4.74	%
Securities available for sale (2)	1,538,961			21,204		2.78	%	1,669,607			21,549		2.60	%
Securities held to maturity (3)	83,665			1,092		2.63	%	89,165			856		1.93	%
Debt securities available for sale (2)															1,547,418			18,781		2.44	%	1,515,627			20,923		2.78	%
Debt securities held to maturity (3)															70,355			708		2.02	%	83,665			1,092		2.63	%
Equity securities with readily determinable fair value not held for trading															24,178			252		2.10	%	23,334			281		2.43	%
Federal Reserve Bank and FHLB stock	66,657			2,171		6.57	%	70,304			2,045		5.90	%	70,497			1,952		5.57	%	66,657			2,171		6.57	%
Deposits with banks	127,551			1,543		2.44	%	157,391			1,279		1.63	%	193,627			518		0.54	%	127,551			1,543		2.44	%
Total interest-earning assets	7,491,440			159,533		4.29	%	7,889,360			147,847		3.78	%	7,549,163			135,482		3.61	%	7,491,440			159,533		4.29	%
Total non-interest-earning assets less allowance for loan losses	473,237							524,074							500,363							473,237
Total assets	$	7,964,677						$	8,413,434						$	8,049,526						$	7,964,677

Interest-bearing liabilities:
Checking and saving accounts -
Interest bearing DDA	$	1,235,056		$	575	0.09	%	$	1,446,823		$	202	0.03	%	$	1,097,489		$	239	0.04	%	$	1,235,056		$	575	0.09	%
Money market	1,150,805			7,714		1.35	%	1,219,748			5,652		0.93	%	1,124,432			4,770		0.85	%	1,150,805			7,714		1.35	%
Savings	376,443			33		0.02	%	438,668			36		0.02	%	321,663			65		0.04	%	376,443			33		0.02	%
Total checking and saving accounts	2,762,304			8,322		0.61	%	3,105,239			5,890		0.38	%	2,543,584			5,074		0.40	%	2,762,304			8,322		0.61	%
Time deposits	2,368,185			25,293		2.15	%	2,323,746			18,872		1.63	%	2,472,646			25,890		2.11	%	2,368,185			25,293		2.15	%
Total deposits	5,130,489			33,615		1.32	%	5,428,985			24,762		0.91	%	5,016,230			30,964		1.24	%	5,130,489			33,615		1.32	%
Securities sold under agreements to repurchase	—			—		—	%	213			2		1.89	%	237			—		—	%	—			—		—	%
Advances from the FHLB and other borrowings (4)	1,086,586			12,497		2.32	%	1,179,934			12,501		2.13	%	1,179,368			7,522		1.28	%	1,086,586			12,497		2.32	%
Senior notes															2,568			84		6.58	%	—			—		—	%
Junior subordinated debentures	118,110			4,195		7.16	%	118,110			3,960		6.82	%	68,650			1,360		3.98	%	118,110			4,195		7.16	%
Total interest-bearing liabilities	6,335,185			50,307		1.60	%	6,727,242			41,225		1.23	%	6,267,053			39,930		1.28	%	6,335,185			50,307		1.60	%
Non-interest-bearing liabilities:
Non-interest bearing demand deposits															836,782							786,674
Accounts payable, accrued liabilities and other liabilities															97,816							69,367
Total non-interest-bearing liabilities	856,041							938,287							934,598							856,041
Total liabilities	7,191,226							7,665,529							7,201,651							7,191,226
Stockholders’ equity	773,451							747,905							847,875							773,451
Total liabilities and stockholders' equity	$	7,964,677						$	8,413,434						$	8,049,526						$	7,964,677
Excess of average interest-earning assets over average interest-bearing liabilities	$	1,156,255						$	1,162,118						$	1,282,110						$	1,156,255
Net interest income				$	109,226						$	106,622						$	95,552						$	109,226
Net interest rate spread						2.69	%						2.55	%						2.33	%						2.69	%
Net interest margin (5)						2.94	%						2.72	%						2.55	%						2.94	%
Ratio of average interest-earning assets to average interest-bearing liabilities	118.25		%					117.27		%					120.46		%					118.25		%

~~_____________~~___________


(1)	Average non-performing loans of ~~$24.5~~$50.4 million and ~~$34.0~~$24.5 million for the three months ended June 30, 2020 and 2019, respectively, and ~~2018, respectively,~~$41.6 million and $22.1 ~~million and $32.7~~ million for the six months ended June 30, ~~2019~~ 2020,and ~~2018,~~2019, respectively, are included in the average loan portfolio, ~~net balance.~~net.

(2)

Includes nontaxable securities with average balances of ~~$122.9~~$62.2 million and ~~$174.1~~$122.9 million for the three months ended June 30, 2020 and 2019, respectively, and ~~2018, respectively,~~$55.8 million and $140.4 ~~million and $175.4~~ million for the six months ended June 30, 2020, and 2019, ~~and 2018,~~ respectively. The tax equivalent yield for these nontaxable securities for the three months ended June 30, 2020 and 2019 was 3.77% and ~~2018 was~~ 4.05% ~~and 4.10%~~, respectively, and ~~4.03%~~3.82% and ~~3.83%~~4.03% for the six months ended June 30, 2020, and 2019, respectively. In 2020 and ~~2018, respectively. In the three and six month periods ended June 30,~~ 2019, ~~and 2018,~~ the tax equivalent yields were calculated by assuming a 21% tax rate and dividing the actual yield by 0.79.

(3)

Includes nontaxable securities with average balances of ~~$82.7~~$68.2 million and ~~$88.8~~$82.7 million for the three months ended June 30, 2020 and 2019, respectively, and ~~2018, respectively,~~$70.4 million and $83.7 ~~million and $88.9~~ million for the six months ended June 30, 2020 and 2019, ~~and 2018,~~ respectively. The tax equivalent yield for these nontaxable securities for the three months ended June 30, 2020 and 2019 was 2.30% and ~~2018 was~~ 3.10% ~~and 2.00%~~, respectively, and ~~3.33%~~2.56% and ~~2.45%~~3.33% for the six months ended June 30, 2020, and 2019, respectively. In 2020 and ~~2018, respectively. In the three and six month periods ended June 30,~~ 2019, ~~and 2018,~~ the tax equivalent yields were calculated by assuming a 21% tax rate and dividing the actual yield by ~~0.79 (1 minus the tax rate of 0.21).~~0.79.


(4)	The terms of the advance agreements require the Bank to maintain certain investment securities or loans as collateral for these advances.


(5)	Net interest margin is defined as net interest income divided by average interest-earning assets, which are loans, securities, ~~available for sale and held to maturity,~~ deposits with banks and other financial assets which yield interest or similar income.

Analysis of the Allowance for Loan Losses

Set forth in the table below are the changes in the allowance for loan losses for each of the periods presented.


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
(in thousands)
Balance at the beginning of the period	$	60,322		$	72,118		$	61,762		$	72,000		$	72,948		$	60,322		$	52,223		$	61,762

Charge-offs
Domestic Loans:
Real Estate
Real estate loans
Single-family residential	—			(27		)	(87		)	(27		)	—			—			—			(87		)
Owner occupied													—			—			(27		)	—
													—			—			(27		)	(87		)
Commercial	(874		)	(2,355		)	(1,866		)	(2,737		)	(2,075		)	(874		)	(3,149		)	(1,866		)
Consumer and others	(210		)	(71		)	(319		)	(90		)	(44		)	(210		)	(266		)	(319		)
	(1,084		)	(2,453		)	(2,272		)	(2,854		)	(2,119		)	(1,084		)	(3,442		)	(2,272		)

International Loans (1):
Commercial	(43		)	(52		)	(61		)	(52		)	—			(43		)	(34		)	(61		)
Consumer and others	(894		)	(230		)	(1,300		)	(630		)	(7		)	(894		)	(258		)	(1,300		)
	(937		)	(282		)	(1,361		)	(682		)	(7		)	(937		)	(292		)	(1,361		)
Total Charge-offs	$	(2,021	)	$	(2,735	)	$	(3,633	)	$	(3,536	)	$	(2,126	)	$	(2,021	)	$	(3,734	)	$	(3,633	)

Recoveries
Domestic Loans:
Real Estate Loans
Commercial Real Estate (CRE)
Non-Owner occupied	$	—		$	4		$	—		$	5
Land development and construction loans	—			—			—			33
	—			4			—			38
Real estate loans
Single-family residential	104			60			143			64			40			104			70			143
Owner occupied	2			95			2			883			—			2			—			2
	106			159			145			985			40			106			70			145
Commercial	149			174			180			218			50			149			111			180
Consumer and others	6			26			7			32			2			6			19			7
	261			359			332			1,235			92			261			200			332

International Loans (1):
Real Estate
Single-family residential	$	—		$	—		$	—		$	—
Commercial	136			—			228			—			—			136			124			228
Consumer and others	56			39			65			82			118			56			219			65
	192			39			293			82			118			192			343			293
Total Recoveries	$	453		$	398		$	625		$	1,317		$	210		$	453		$	543		$	625

Net charge-offs	(1,568		)	(2,337		)	(3,008		)	(2,219		)	(1,916		)	(1,568		)	(3,191		)	(3,008		)
(Reversal of) provision for loan losses	(1,350		)	150			(1,350		)	150
Provision for (reversal of) loan losses													48,620			(1,350		)	70,620			(1,350		)
Balance at the end of the period	$	57,404		$	69,931		$	57,404		$	69,931		$	119,652		$	57,404		$	119,652		$	57,404

__________________


(1)	Includes transactions in which the debtor or the customer is domiciled outside the U.S., even when the collateral is located in the U.S.

Set forth in the table below is the composition of international consumer loans and overdraft charge-offs by country for each of the periods presented.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
(in thousands)
Venezuela	$	729	$	230	1,041		630		$	7	$	729	238		1,041
Other countries	165		—		259		—		—		165		20		259
Total charge offs	$	894	$	230	$	1,300	$	630	$	7	$	894	$	258	$	1,300

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

During the three months ended June 30, ~~2019,~~2020, charge-offs ~~decreased~~increased by $0.1 million, or 5.2%, compared to ~~$2.0 million from $2.7 million during~~ the same period of the prior year. ~~This decrease was mainly due to higher charge-offs related to domestic commercial loans in~~Charge-offs during the second quarter of ~~2018, partially offset by an aggregate of $1.0~~2020 mainly included a $1.9 million ~~in charge-offs~~charge-off on a commercial loan related to ~~credit cards~~South Florida food wholesale borrower disclosed in previous quarters. This loan had already been reserved and the Company did not experience any unanticipated losses during the second quarter of ~~2019. Additionally, recoveries increased to $0.5 million in the three months ended June 30, 2019, compared to $0.4 million during the same period in 2018.~~2020. The ~~increase in recoveries was mainly driven by a $136 thousand recovery related to one international commercial loan in the second quarter of 2019. As a result, the~~ ratio of net charge-offs over the average total loan portfolio during the three months ended June 30, ~~2019 decreased 5~~2020 increased 2 basis ~~points~~point to ~~0.11%~~0.13% from ~~a net charge-off ratio of 0.16%~~0.11% in the same quarter in ~~2018.~~2019.

~~During the three months ended June 30, 2019 we released $1.4 million from the allowance~~The Company recorded a provision for loan losses of $48.6 million during the second quarter of 2020, compared to a reversal of loan losses of $1.4 million in the second quarter of 2019. The provision for loan losses during the second quarter of 2020 was mainly due to a provision of ~~$0.2~~$28.2 million due to specific reserve requirements as a result of loan portfolio deterioration and downgrades during the ~~same period last year. This was mainly~~period. In addition, the provision for loan losses during the second quarter of 2020 included $20.2 million driven by ~~improved quantitative factors~~estimated probable losses reflecting deterioration in ~~CRE and domestic commercial loans. Improved quantitative factors were partially offset by additional~~the macro-economic environment as a result of the COVID-19 pandemic across multiple impacted sectors.

The provision of $28.2 million in specific reserve requirements during the second quarter of 2020 includes $20.0 million related to certain loan arrangements with a Miami based U.S. coffee trader, which as of June 30, 2020, had loan arrangements with an outstanding balance of approximately $39.8 million. As disclosed by the Company on a current report on Form 8-K filed on July 16, 2020, the management of the Bank and the Company considered it necessary and prudent to provide, as of the close of the second quarter of 2020, for ~~$11.6~~a loan loss reserve for this indebtedness which it initially estimated at approximately $17.0 million. On July 22, 2020, the Company received additional information from the assignee leading the liquidation procedure for the borrower and, based on an evaluation of this additional information, management of the Bank and the Company considered it necessary and prudent to increase the loan loss reserve for this indebtedness by an additional $3.1 million for a total of ~~loans~~$20.0 million. As the liquidation procedure progresses and more information becomes available, management may decide to ~~a South Florida customer that was placed in non-accrual in June 2019,~~increase or decrease the loan loss reserve for this indebtedness. The Company intends to pursue any possible courses of actions available to it to mitigate the ultimate losses on this indebtedness and recover as much of the outstanding indebtedness as possible. Nevertheless, it is too early to determine if any of these possible courses of action are available to it and/or will be successful.

While it is difficult to estimate the extent of the impact of COVID-19 on Amerant’s credit quality, Amerant continues to proactively and carefully monitor the Company’s credit ~~card~~quality practices, including examining and responding to patterns or trends that may arise across certain industries or regions. Importantly, while the Company continues to offer customized loan payment relief options, including interest-only payments and forbearance options, which are not considered loan modifications meeting the criteria of troubled debt restructurings, or TDRs, it will continue to assess its ability to offer such programs over time. The concentration of the loan portfolio ~~and for growth in domestic loans. See “Loan Quality” for details on this downgraded loan relationship. During the three months ended~~remains stable compared to December 31, 2019.

As of June 30, ~~2018, we had lower reserve requirements mainly due~~2020, approximately 42% of the outstanding loan portfolio was tied to ~~improvements in quantitative factors and positive adjustments to qualitative factors applied~~industries, or with collateral values, that are potentially more vulnerable to the financial impact of the COVID-19 pandemic, up from

approximately 30% of loans at March 31, 2020. Approximately 67% of these loans are secured with real estate collateral at June 30, 2020, compared to approximately 50% at March 31, 2020. Except for loans to the real estate industry, the loan portfolio remains well diversified with the highest industry concentration representing 11% of total loans, compared to 12% at March 31, 2020. At the close of June 30, 2020, the Company’s Commercial Real Estate (“CRE”) loan portfolio, represented 50.2% of total loans, with an estimated weighted average Loan to Value (LTV) of 61% and an estimated weighted average Debt Service Coverage Ratio (DSCR) of 1.7x. At the close of March 31, 2020, the Company’s CRE ~~portfolio. These adjustments partially covered the reserve requirements for charge-offs, non-performing~~loan portfolio was 51.8% of total loans, ~~portfolio growth and additional provision requirements associated~~ with a ~~qualitative assessment~~LTV of 60% and an estimated DSCR of 1.6x. Importantly, CRE loans to top tier customers, which are those considered to have the greatest strength and credit quality, represent approximately 42% of the ~~effect to our~~CRE loan portfolio ~~from the new tariffs on imports.~~at both June 30, 2020 and March 31, 2020.

Six Months Ended June 30, 2020 and 2019~~and2018~~

During the six months ended June 30, ~~2019,~~2020, charge-offs increased ~~to $3.6~~by $0.1 million, ~~from $3.5 million during~~or 2.8%, compared to the same period ~~one year ago. In~~of the ~~six months ended June 30, 2019,~~prior year. Charge-offs during the ~~increase~~first half of 2020 included $1.9 million on a commercial loan to a South Florida food wholesale borrower disclosed in ~~charge-offs was primarily~~previous quarters, $1.1 million related to 4 commercial loans and $0.4 million related to multiple credit cards due to ~~an aggregate~~the discontinuation of ~~$1.5~~the Company’s credit card products. The aforementioned $0.4 million in credit card charge-offs ~~related to credit cards, partially offset by lower charge-offs in commercial loans. Additionally, recoveries decreased to $0.6 million in~~had already been reserved and the ~~six months ended June 30, 2019, compared to $1.3 million~~Company did not experience any unanticipated losses during the ~~same period in 2018.~~first half of 2020. The ~~decrease in recoveries was mainly driven by a $0.8 million recovery of an owner-occupied commercial real estate loan in the first quarter of 2018. As a result, the~~ ratio of net charge-offs over the average total loan portfolio during the six months ended June 30, ~~2019 increased 4 basis points~~2020 remained unchanged at 0.11% compared to ~~0.11% from 0.07% in~~ the same period in ~~2018.~~2019.

~~During the six months ended June 30, 2019 we reversed $1.4 million from the allowance~~The Company recorded a provision for loan losses of $70.6 million during the first half of 2020, compared to a reversal of loan losses of $1.4 million in the first half of 2020. The increase in provision during the first half of 2020 was mainly due to a provision of ~~$0.2~~$40.0 million driven by estimated probable losses reflecting deterioration in the macro-economic environment as a result of the COVID-19 pandemic across multiple impacted sectors. In addition, the increase in provision during the ~~same period last year. During the six months ended June 30, 2019, lower~~first half of 2020 includes $28.2 million due to specific reserve requirements ~~due to~~as a result of loan portfolio deterioration and downgrades during the improvement in quantitative factors in CRE and commercial loans were partially offset by the reserve requirements for charge-offs, non-performing loans, credit cards and portfolio composition changes. During the six months ended June 30, 2018, lower reserve requirements were mainly due to improvements in quantitative factors and positive adjustments to qualitative factors applied to the CRE portfolio partially covered the reserve requirements for charge-offs, non-performing loans, portfolio growth and additional provision requirements associated with a qualitative assessment of the effect to our portfolio from the new tariffs on imports.period.

Noninterest Income

The table below sets forth a comparison for each of the categories of noninterest income for the periods presented.


	Three Months Ended June 30,								Change					Three Months Ended June 30,									Change
	2019				2018				2019 over 2018					2020					2019				2020 vs 2019
	Amount		%		Amount		%		Amount			%		Amount			%		Amount		%		Amount			%
(in thousands, except percentages)
Deposits and service fees	$	4,341	30.7	%	$	4,471	29.8	%	$	(130	)	(2.9	)%	$	3,438		17.4	%	$	4,341	30.7	%	$	(903	)	(20.8	)%
Brokerage, advisory and fiduciary activities	3,736		26.4	%	4,426		29.5	%	(690		)	(15.6	)%	4,325			21.9	%	3,736		26.4	%	589			15.8	%
Change in cash surrender value of bank owned life insurance (“BOLI”)(1)	1,419		10.0	%	1,474		9.8	%	(55		)	(3.7	)%	1,427			7.2	%	1,419		10.0	%	8			0.6	%
Securities gains, net (2)														7,737			39.2	%	992		7.0	%	6,745			N/M
Cards and trade finance servicing fees	1,419		10.0	%	1,173		7.8	%	246			21.0	%	273			1.4	%	1,419		10.0	%	(1,146		)	(80.8	)%
Gain on early extinguishment of FHLB advances	—		—	%	882		5.9	%	(882		)	N/M
(Loss) gain on early extinguishment of FHLB advances, net														(66		)	(0.3	)%	—		—	%	(66		)	N/M
Data processing and fees for other services	365		2.6	%	$	613	4.1	%	(248		)	(40.5	)%	—			—	%	365		2.6	%	(365		)	(100.0	)%
Securities gains, net	992		7.0	%	16		0.1	%	976			N/M
Other noninterest income ~~(2)~~(3)	1,875		13.3	%	1,931		13.0	%	(56		)	(2.9	)%	2,619			13.2	%	1,875		13.3	%	744			39.7	%
Total noninterest income	$	14,147	100.0	%	$	14,986	100.0	%	$	(839	)	(5.6	)%	$	19,753		100.0	%	$	14,147	100.0	%	$	5,606		39.6	%


	Six Months Ended June 30,								Change					Six Months Ended June 30,									Change
	2019				2018				2019 over 2018					2020					2019				2020 over 2019
	Amount		%		Amount		%		Amount			%		Amount			%		Amount		%		Amount			%
(in thousands, except percentages)
Deposits and service fees	$	8,427	30.9	%	$	9,053	31.3	%	$	(626	)	(6.9	)%	$	7,728		18.6	%	$	8,427	30.9	%	$	(699	)	(8.3	)%
Brokerage, advisory and fiduciary activities	7,424		27.2	%	8,841		30.6	%	(1,417		)	(16.0	)%	8,458			20.3	%	7,424		27.2	%	1,034			13.9	%
Change in cash surrender value of bank owned life insurance (“BOLI”)(1)	2,823		10.3	%	2,918		10.1	%	(95		)	(3.3	)%	2,841			6.8	%	2,823		10.3	%	18			0.6	%
Securities gains, net (2)														17,357			41.7	%	996		3.7	%	16,361			N/M
Cards and trade finance servicing fees	2,334		8.6	%	2,235		7.7	%	99			4.4	%	668			1.6	%	2,334		8.6	%	(1,666		)	(71.4	)%
Gain on early extinguishment of FHLB advances	557		2.0	%	882		3.1	%	(325		)	(36.9	)%
(Loss) gain on early extinguishment of FHLB advances, net														(73		)	(0.2	)%	557		2.0	%	(630		)	(113.1	)%
Data processing and fees for other services	885		3.2	%	$	1,494	5.2	%	(609		)	(40.8	)%	—			—	%	885		3.2	%	(885		)	(100.0	)%
Securities gains, net	996		3.7	%	16		0.1	%	980			N/M
Other noninterest income ~~(2)~~(3)	3,857		14.1	%	3,492		11.9	%	365			10.5	%	4,684			11.2	%	3,857		14.1	%	827			21.4	%
Total noninterest income	$	27,303	100.0	%	$	28,931	100.0	%	$	(1,628	)	(5.6	)%	$	41,663		100.0	%	$	27,303	100.0	%	$	14,360		52.6	%

~~_________________~~

___________


(1)	Changes in cash surrender value of BOLI are not taxable.


(2)	Includes net gain on sale of debt securities of $7.5 million and $16.8 million during the three and six month periods ended June 30, 2020, respectively, and unrealized gain on change in market value of mutual fund of $0.2 million and $0.6 million during the three and six month periods ended June 30, 2020, respectively.


(3)	Includes rental income, income from derivative and foreign currency exchange transactions with customers, and ~~credits which mirror the~~ valuation ~~loss~~income on the investment balances held in the non-qualified deferred compensation ~~plan in order to adjust our liability to participants of the deferred compensation plan~~plan.

N/M ~~Not~~Means not meaningful

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Total noninterest income ~~decreased $0.8~~increased $5.6 million, or ~~5.6%~~39.6%, in the ~~quarter~~three months ended June 30, ~~2019~~2020 compared to the same period of ~~2018.~~2019. The ~~decline~~increase was mainly driven by: (i) a $6.7 million increase in net securities gains driven by ~~lower~~a $7.5 million net gain on the sale of 30-year Treasury securities in the second quarter of 2020; (ii) higher other noninterest income and (iii) higher income from brokerage, advisory and fiduciary activities, lower fees from administrative and transition services provided to our Former Parent, and the $0.9 million one-time gain realized in the second quarter of 2018 as a result of the early termination of advances from the Federal Home Loan Bank.activities. These ~~decreases~~results were partially offset ~~by a $1.0 million gain on~~by: (i) lower cards and trade finance servicing fees; (ii) lower deposits and service fees, and (iii) the ~~sale~~absence of municipal bonds as the lower interest rate environment provided a strong market for floating-rate bonds and higher debit card interchange fees. The Durbin Amendment’s limit on interchange fees was eliminated at the end of 2018 when the Federal Reserve determined that we are no longer controlled by our Former Parent. We expect an annualized increase in debit card fees of approximately $0.9 million.

Brokerage, advisory and fiduciary activities decreased $0.7 million during the three months ended June 30, 2019 compared to the same period one year ago, mainly driven by lower volumes of customer trading in 2019. In February 2019, the United States placed new restrictions on the trading of Venezuelan securities not previously restricted. These restrictions have effectively eliminated our customers’ trading in those securities and has negatively affected our fee income. During 2018, the Company earned approximately $1.5 million from trading in these securities. We expect these trading restrictions to continue to limit our fixed income trading activity for the foreseeable future. The Company will continue to focus on leveraging our wealth management platform to grow this side of our domestic business.

~~Six Months Ended June 30, 2019~~ ~~and 2018~~

~~Total noninterest income decreased by $1.6 million in the six months ended June 30, 2019. This was driven by lower income from brokerage, advisory and fiduciary activities, lower~~ data processing and fees for other services previously provided to ~~our~~the Former Parent ~~lower gain on early extinguishment of FHLB advances~~ and ~~lower deposit and service fees. In addition,~~its affiliates.

Other noninterest income increased by $0.7 million or 39.7%, in the ~~first half~~second quarter of ~~2019, we received $0.6 million in compensation as a result of the early termination of advances~~2020 compared to ~~$0.9 million during~~ the same period ~~one~~last year, ~~ago. The decrease~~mainly due an increase of $0.9 million in ~~noninterest income was partially offset by the aforementioned $1.0 million gain on sale of municipal bonds and higher~~ income from ~~cards and trade finance servicing fees.~~derivative transactions with customers driven by higher customer activity.

Brokerage, advisory and fiduciary activities decreased $1.4 million during the first half of 2019 compared to the first half of 2018, mainly due to lower volumes of customer trading activities in connection with the trading limitations on Venezuelan securities.

~~Deposits and service fees declined by~~increased $0.6 million during the first half of 2019 compared to the first half of 2018, mainly as a result of lower wire transfer activity in 2019. Also, during the second quarter of 2019, certain card interchange fees that had been previously classified as deposit and service fees were reclassified to "Cards and trade finance servicing fees" to better reflect the nature and source of these fees.

~~Data processing and fees for other services declined by $0.6 million~~or 15.8%, in the ~~six~~three months ended June 30, ~~2019~~2020 compared to the same period last year. This was primarily due to an increase in advisory services as a result of a larger allocation of AUMs in the Company’s advisory services business and, higher volume of customer trading activity as a result of increased market volatility.

Cards and trade finance servicing fees declined $1.1 million or 80.8%, in the three months ended June 30, 2020 compared to the same period last year, mainly due to the previously announced changes to the Company's credit card programs.

Deposit and other service fees decreased by $0.9 million or 20.8% in the three moths ended June 30, 2020 compared to the same period last year mainly driven by lower wire transfer fees attributed to the slowdown of economic activity due to the COVID-19 pandemic as well as the implementation of Zelle®.

In the three months ended June 30, 2020, there were no data processing and fees for other services compared to $0.4 million in ~~connection with~~ the ~~separation from our~~same period last year, as services previously provided to the Company’s Former Parent ~~including~~and its affiliates ended in the third quarter of 2019.

Six Months Ended June 30, 2020 and 2019

Total noninterest income increased $14.4 million, or 52.6%, in the six months ended June 30, 2020 compared to the same period of 2019, mainly driven by: (i) $16.8 million net gain on the sale of ~~our subsidiary G200 Leasing, LLC (“G200 Leasing”) to our Former Parent~~debt securities in the first ~~quarter~~half of ~~2018, and~~2020 compared to $1.0 million in the ~~resulting loss of aircraft rental~~same period in 2019; (ii) higher income from ~~our~~brokerage, advisory and fiduciary activities and (iii) higher other noninterest income. These results were partially offset by: (i) lower cards and trade finance servicing fees; (ii) lower deposits and service fees; (iii) the absence of $0.9 million in data processing and fees for other services previously provided to the Former ~~Parent.~~Parent and its affiliates, and (iv) the absence of the $0.6 million gain on early extinguishment of FHLB advances in the first half of 2019.

Brokerage, advisory and fiduciary activities increased $1.0 million or 13.9%, in the first half of 2020 compared to the same period last year. This was primarily due to an increase in advisory services as a result of a larger allocation of AUMs in the Company’s advisory services business, higher volume of customer trading activity as a result of increased market volatility, and increased mutual fund activity.

Other noninterest income increased by ~~$0.4~~$0.8 million or 21.4%, in the first half of ~~2019~~2020 compared to the first half of ~~2018. This~~2019, mainly due an increase ~~was~~of $1.0 million in income from derivative transactions with customers driven by higher customer activity.

Cards and trade finance servicing fees declined $1.7 million or 71.4%, in the six months ended June 30, 2020 compared to the same period last year, mainly due to the previously announced changes to the Company's credit card programs.

Deposit and other service fees decreased by $0.7 million or 8.3% in the six months ended June 30, 2020 compared to the same period in 2019, mainly driven by ~~higher income from derivative and foreign transactions with customers in connection with~~lower wire transfer fees attributed to the ~~execution~~slowdown of ~~several interest rate swap contracts with large notional amounts.~~economic activity due to the COVID-19 pandemic, as well as the implementation of Zelle®.

Noninterest Expense

The table below presents a comparison for each of the categories of noninterest expense for the periods presented.


	Three Months Ended June 30,								Change					Three Months Ended June 30,								Change
	2019				2018				2019 vs 2018					2020				2019				2020 vs 2019
	Amount		% of Total		Amount		% of Total		Amount			% of Total		Amount		%		Amount		%		Amount			%
(in thousands, except percentages)
Salaries and employee benefits	$	34,057	64.4	%	$	34,932	66.4	%	$	(875	)	(2.5	)%	$	21,570	58.7	%	$	34,057	64.4	%	$	(12,487	)	(36.7	)%
Occupancy and equipment	4,232		8.0	%	4,060		7.7	%	172			4.2	%	4,220		11.5	%	4,232		8.0	%	(12		)	(0.3	)%
Professional and other services fees	3,954		7.5	%	5,387		10.2	%	(1,433		)	(26.6	)%	3,965		10.8	%	3,954		7.5	%	11			0.3	%
Telecommunications and data processing	3,233		6.1	%	3,011		5.7	%	222			7.4	%	3,157		8.6	%	3,233		6.1	%	(76		)	(2.4	)%
Depreciation and amortization	2,010		3.8	%	1,945		3.7	%	65			3.3	%	1,960		5.3	%	2,010		3.8	%	(50		)	(2.5	)%
FDIC assessments and insurance	1,177		2.2	%	1,468		2.8	%	(291		)	(19.8	)%	1,240		3.4	%	1,177		2.2	%	63			5.4	%
Other operating expenses (1)	4,242		8.0	%	1,835		3.5	%	2,407			131.2	%	628		1.7	%	4,242		8.0	%	(3,614		)	(85.2	)%
Total noninterest expenses	$	52,905	100.0	%	$	52,638	100.0	%	$	267		0.5	%	$	36,740	100.0	%	$	52,905	100.0	%	$	(16,165	)	(30.6	)%


	Six Months Ended June 30,								Change					Six Months Ended June 30,								Change
	2019				2018				2019 vs 2018					2020				2019				2020 vs 2019
	Amount		%		Amount		%		Amount			%		Amount		%		Amount		%		Amount			%
(in thousands, except percentages)
Salaries and employee benefits	$	67,494	64.4	%	$	68,973	63.7	%	$	(1,479	)	(2.1	)%	$	50,896	62.4	%	$	67,494	64.4	%	$	(16,598	)	(24.6	)%
Occupancy and equipment	8,274		7.9	%	7,775		7.2	%	499			6.4	%	8,023		9.8	%	8,274		7.9	%	(251		)	(3.0	)%
Professional and other services fees	7,398		7.1	%	11,831		10.9	%	(4,433		)	(37.5	)%	6,919		8.5	%	7,398		7.1	%	(479		)	(6.5	)%
Telecommunications and data processing	6,259		6.0	%	6,095		5.6	%	164			2.7	%	6,621		8.1	%	6,259		6.0	%	362			5.8	%
Depreciation and amortization	3,952		3.8	%	4,086		3.8	%	(134		)	(3.3	)%	3,919		4.8	%	3,952		3.8	%	(33		)	(0.8	)%
FDIC assessments and insurance	2,570		2.5	%	2,915		2.7	%	(345		)	(11.8	)%	2,358		2.9	%	2,570		2.5	%	(212		)	(8.3	)%
Other operating expenses (1)	8,903		8.3	%	6,608		6.1	%	2,295			34.7	%	2,871		3.5	%	8,903		8.3	%	(6,032		)	(67.8	)%
Total noninterest expenses	$	104,850	100.0	%	$	108,283	100.0	%	$	(3,433	)	(3.2	)%	$	81,607	100.0	%	$	104,850	100.0	%	$	(23,243	)	(22.2	)%

________


(1)	Includes advertising, marketing, charitable contributions, community engagement, postage and courier expenses, provisions for possible losses on contingent loans, and debits which mirror the valuation income on the investment balances held in the non-qualified deferred compensation plan in order to adjust our liability to participants of the deferred compensation plan.

~~(1)~~ Includes advertising, marketing, charitable contributions, community engagement, postage and courier expenses, provisions for possible losses on contingent loans, and debits which mirror the valuation income on the investment balances held in the non-qualified deferred compensation plan in order to adjust our liability to participants of the deferred compensation plan.

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Noninterest expense ~~increased~~decreased by ~~$0.3~~$16.2 million, or ~~0.5%~~30.6%, in the three months ended June 30, ~~2019~~2020 compared to the same period in ~~2018,~~2019, primarily ~~the result of higher other operating expenses. These results were partially offset~~driven by lower ~~professional and other services fees as well as a decrease in the costs associated with~~ salaries and employee benefits and lower ~~FDIC insurance~~other operating expenses.

~~Other operating expenses increased~~Salaries and employee benefits decreased by ~~$2.4~~$12.5 million or 36.7%, in the three months ended June 30, 2020 compared to the same period last year. This was mainly due to: (i) staff reductions completed in 2019 ~~mainly~~and 2018 as well as lower stock-based compensation expense in the second quarter of 2020 and, (ii) the deferral of $7.8 million of expenses directly related to origination of loans under the PPP program in accordance with GAAP. In addition, in the second quarter of 2020, the staff reduction costs driven by ~~$1.8~~the Company’s ongoing transformation efforts decreased by $0.5 million, ~~of restructuring~~or 60.3%, to $0.4 million compared to $0.9 million during the same period one year ago.

Other operating expenses ~~related to rebranding incurred~~decreased by $3.6 million or 85.2%, in the three months ended June 30, 2019. We launched “Amerant” as our new brand across all our markets in April 2019. The launch included rebranding of all digital platforms, new signs in most branches and buildings, and a broad campaign through digital and traditional media focused on brand awareness. We expect our rebranding rollout to be substantially completed during the fourth quarter of 2019, and we expect to spend approximately $1.8 million in additional rebranding expenses for the remainder of 2019. In addition, we expect to incur approximately $1.2 million in CAPEX, which will be amortized over the shorter of seven years (the estimated useful life of our signs), the remaining life of owned buildings or the remaining terms of leased facilities. Other operating expenses in the second quarter of 2019 also included a reversal of the provision for possible losses on the off-balance sheet credit exposure of $0.4 million compared to $1.0 million in the same quarter one year ago.

~~The decrease of $1.4 million, or 26.6%, in professional and other services fees during the quarter ended June 30, 2019~~2020 compared to the same period last ~~year~~year. This was mainly due to ~~$2.0~~the absence of rebranding costs in the second quarter of 2020 compared to $1.8 million of ~~fees incurred~~rebranding costs in ~~connection~~the same period last year related to the Company’s transformation efforts, as well as lower regular marketing expenses. In addition, the second quarter of 2020 includes a decrease of $0.7 million compared to the same period of 2019 mainly driven by the deferral of other operating expenses directly related to PPP loan originations in the second quarter of 2020.

During the three months ended June 30, 2020, the Company continued with ~~our spin-off~~its digital transformation efforts, making steady progress on its planned adoption of the Salesforce® Customer Relationship Management (“CRM”) and nCino® loan origination platforms. In addition, the Company is in the process of implementing additional enhancements to its operating processes, including more notably a new approach for servicing calls from ~~our Former Parent~~its customers. Restructuring costs for the three and six months ended June 30, 2020 include digital transformation expenses of $1.0 million and $1.3 million, respectively. Digital transformation expenses during the three months ended June 30, ~~2018.~~

~~Salaries~~2020 consisted of $0.6 million of professional and ~~employee benefits decreased by $0.9~~service fees and $0.4 million of telecommunication and data processing expenses. We had no digital transformation expenses in the three months ended June 30, 2019. This change was mainly driven by staff reductions in 2019 and 2018 and the $1.2 million paid to participants of the non-qualified deferred compensation plan to partially mitigate the effect of the unexpected early distribution for federal income tax purposes in the second quarter of 2018. These results were partially offset by $1.5 million in additional compensation costs related to the shares of restricted stock awarded in December 2018 and January 2019 and the $0.9 million in staff reduction costs related to our various restructuring activities in the second quartersame period of 2019. The ~~total compensation cost related~~Company is also moving forward with the closure of one banking center in Florida, and another in Texas. These closures are the result of extensive analyses of the profitability of the Company’s retail banking network and their current and expected individual contributions to ~~these restricted shares is expected to be approximately $6.0 million, or $1.5 million per quarter, through 2019, declining to an estimated cost of $2.7 million in 2020 and $1.1 million in 2021.~~achieving the Company’s strategic goals.

FDIC assessments and insurance expense decreased by $0.3 million in the three months ended June 30, 2019. The decrease was primarily due to lower FDIC assessment rates, the discontinuation of The Financing Corporation (“FICO”) fees and lower average balances.

Six Months Ended June 30, 2020and2019 ~~and 2018~~

Noninterest expense decreased by ~~$3.4~~23.2 million, or ~~3.2%~~22.2%, in the six months ended June 30, ~~2019,~~2020 compared to the same period ~~one year ago. This was mainly~~in 2019, primarily driven by lower ~~professional and other services fees as well as a decrease in the costs associated with~~ salaries and employee benefits, lower other operating expenses and lower ~~FDIC assessments~~other professional and ~~insurance expense,~~services fees. This was partially offset by higher ~~other operating~~telecommunication and data processing expenses in the first half of 2020 compared to the same period last year.

Salaries and ~~higher occupancy and equipment costs.~~

~~The decrease of $4.4~~employee benefits decreased by $16.6 million or ~~37.5%~~24.6%, in ~~professional and other services fees during~~ the six months ended June 30, ~~2019~~2020 compared to the same period last year. This was mainly due to: (i) staff reductions completed in 2019 and 2018 as well as lower stock-based compensation expense in the first half of 2020 and, (ii) the deferral of $7.8 million of expenses directly related to origination of loans under the PPP program in accordance with GAAP. In addition, in the first half of 2020, the staff reduction costs decreased by $0.5 million, or 54.4%, to $0.4 million compared to $0.9 million during the same period one year ~~stems from $4.3~~ago.

Other operating expenses decreased by $6.0 million ~~incurred~~or 67.8%, in ~~legal, accounting and consulting fees in connection with our spin-off from our Former Parent during~~ the six months ended June 30, ~~2018.~~2020 compared to the same period last year. This was mainly due to the absence of rebranding costs in the first half of 2020 compared to $2.8 million million of rebranding costs in the same period last year related to the Company’s transformation efforts, as well as lower regular marketing expenses. In addition, the first half of 2020 includes a decrease of $0.7 million compared to the same period of 2019 mainly driven by the deferral of other operating expenses directly related to PPP loan originations in the second quarter of 2020.

~~Other operating~~Telecommunication and data processing expenses increased by ~~$2.3~~$0.4 million in the six months ended June 30, ~~2019,~~2020 compared to the same period last year, mainly driven by ~~$2.8 million of restructuring~~an increase in software services, associated with the Company’s digital transformation.

Digital transformation expenses ~~related to rebranding incurred in~~during the six months ended June 30, ~~2019, partially offset by lower postage~~2020 consisted of $0.6 million of professional and ~~courier~~service fees and $0.6 million of telecommunication and data processing expense. We had no digital transformation expenses in the ~~first half~~same period of 2019.

Salaries and employee benefits decreased by $1.5 million in the six months ended June 30, 2019, mainly driven by staff reductions in 2019 and 2018 and the aforementioned $1.2 million paid to participants of the non-qualified deferred compensation plan. This decrease was partially offset by $3.0 million in additional compensation costs related to the shares of restricted stock awarded in December 2018 and January 2019 and the $0.9 million in staff reduction costs related to our various restructuring activities in the second quarter of 2019.

Occupancy and equipment expenses increased by $0.5 million in the six months ended June 30, 2019, this was mainly due to higher telecommunication maintenance costs primarily related to a one-time project to improve the

~~telecommunications network system of the bank. Also, there was an increase in premise maintenance and repair costs mainly driven by our rebranding activities in the first half of 2019.~~

FDIC assessments and insurance expense decreased by $0.3 million in the six months ended June 30, 2019. The decrease was primarily due to lower FDIC assessment rates, the discontinuation of The Financing Corporation fees and lower average balances. As a small institution (under $10 billion) in assets, we received a credit due to the FDIC’s Deposit Insurance Fund attaining a 1.38% reserve ratio.

Income Taxes

The table below sets forth information related to our income taxes for the periods presented.

Three Months Ended June 30, Change Six Months Ended June 30, Change
2019 2018 2019 vs 2018 2019 2018 2019 vs 2018
(in thousands, except effective tax rates and percentages)

Income tax expense $ 3,524
$ 5,764

($2,240 ) (38.9 )% $ 7,101
$ 7,268

($167 ) (2.3 )%
Effective income tax rate 21.51 % 35.61 % (14.1 )% (39.6 )% 21.50 % 26.80 % (5.3 )% (19.8 )%

The income tax expense for the three and six months ended June 30, 2019 reflects the corporate federal income tax rate under the 2017 Tax Act (the “2017 Tax Act”) which, beginning January 1, 2018, decreased the corporate federal income tax rate from 35% to 21%. During the three and six months ended June 30, 2018, the Company had a higher tax expense mainly as a result of tax adjustments associated with spin-off costs which were not tax deductible.



	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
	2020			2019			2020 vs 2019					2020			2019			2020 vs 2019
(in thousands, except effective tax rates and percentages)
Income tax benefit (expense)	$	4,005		$	(3,524	)		$7,529		(213.65	)%	$	3,115		$	(7,101	)		$10,216		(143.87	)%
Effective income tax rate	20.77		%	21.51		%	(0.74		)%	(3.44	)%	20.75		%	21.50		%	(0.75		)%	(3.49	)%

As of June 30, ~~2019,~~2020, the Company’s net deferred tax asset was ~~$7.0~~$15.6 million, ~~a decline~~an increase of ~~$9.3~~$10.2 million compared to ~~$16.3~~$5.5 million as of December 31, ~~2018.~~2019. This ~~decrease~~result was mainly driven by anthe net increase in the allowance for loan losses of ~~$40.5~~$67.4 million ~~in gross unrealized gains on the available for sale securities~~recorded during the ~~first half of 2019.~~six-month period ended June 30, 2010.

Financial Condition - Comparison of Financial Condition as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019

Assets. Total assets were ~~$7.9~~$8.1 billion as of June 30, ~~2019, a decline~~2020, an increase of ~~$197.5~~$145.3 million, or ~~2.4%~~1.8%, compared to ~~$8.1~~$8.0 billion as of December 31, ~~2018. The decrease was mainly driven by a decrease~~2019. This change includes increases of ~~$103.1~~$96.0 million, or 79.1%, and $60.5 million, or 1.1%, in cash and cash equivalents and loans held for investment net of allowance for loan losses, ~~as foreign loans continued their planned decline, and $90.8~~respectively. Partially offsetting these increases was a decrease of $64.6 million, ~~lower~~or 3.7%, in total securities. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information, including changes in the composition of our interest-earning assets.

Cash and Cash Equivalents. Cash and cash equivalents increased to ~~$90.3~~$217.3 million at June 30, ~~2019~~2020 from ~~$85.7~~$121.3 million at December 31, ~~2018.~~2019. The increase of $96.0 million or 79.1%, is attributable to higher balances at the Federal Reserve as a part of preventive business measures being taken to mitigate the potential negative impact of the COVID-19 pandemic, and include the net proceeds of $58.4 million from the issuance of Senior Notes due 2025 completed during the three months ended June 30, 2020.

Cash flows provided by operating activities were ~~$33.5~~$27.0 million in the six months ended June 30, ~~2019. This~~2020, mainly driven by the net loss of $11.9 million which included the non-cash provision for loan losses of $70.6 million. Operating income was ~~primarily attributed~~$38.3 million in the first half of 2020, which excludes the non-cash provision for loan losses and other items. See “Non-GAAP Financial Measures Reconciliation” for a reconciliation of these non-GAAP financial measures to ~~net income earned and the termination of interest rate swaps designated as cash flow hedges, which resulted in $8.9 million of proceeds.~~ their U.S. GAAP counterparts.

Net cash ~~provided by~~used in investing activities was ~~$224.1~~$28.5 million during the six months ended June 30, ~~2019,~~2020, mainly driven by purchases of available for sale securities and FHLB stock totaling $293.0 million and $8.5 million, respectively, and a net increase in loans of $146.3 million. These disbursements were partially offset by maturities, sales and calls of securities available for sale and FHLB stock totaling ~~$313.8~~$383.1 million and ~~$15.0~~$16.5 million, respectively, and proceeds from loan portfolio sales totaling ~~$214.4~~$15.2 million. ~~These proceeds were partially offset by purchases of available for sale securities and FHLB stock totaling $195.4 million and $13.0 million, respectively.~~

In the six months ended June 30, ~~2019,~~2020, net cash ~~used in~~provided by financing activities was ~~$253.0~~$97.6 million. These activities ~~included~~included: (i) a ~~$165.9~~$253.8 million net ~~decrease~~increase in total demand, savings and money market deposit ~~balances, $40.4~~balances; (ii) a $13.7 million ~~net repayment of advances borrowed from the FLHB, the $28.5 million repurchase of Class B common stock completed in the first quarter of 2019, and a $47.4 million decrease~~increase in time ~~deposits. These disbursements were partially offset by $29.2~~deposits and (iii) $58.4 million in net proceeds from the issuance of Senior Notes during the second quarter of 2020. See “—Capital Resources and Liquidity Management” for more information on the Senior Notes. These proceeds were partially offset by $185.1 million in net repayments of FHLB advances, the redemption of $28.1 million in junior subordinated debentures and the $15.2 million repurchase of shares of Class AB common stock both completed in the first quarter of ~~2019, which were used to purchase Class B common stock.~~2020.

Loans

Loans are our largest component of interest-earning assets. The table below depicts the trend of loans as a percentage of total assets and the allowance for loan losses as a percentage of total loans for the periods presented.


	June 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
(in thousands, except percentages)
Total loans, gross (1)	$	5,812,755		$	5,920,175		$	5,872,271		$	5,744,339
Total loans, gross / total assets	73.3		%	72.9		%	72.2		%	71.9		%

Allowance for loan losses	$	57,404		$	61,762		$	119,652		$	52,223
Allowance for loan losses / total loans, gross (1) (2)	0.99		%	1.04		%	2.04		%	0.91		%

Total loans, net (3)	$	5,755,351		$	5,858,413		$	5,752,619		$	5,692,116
Total loans, net / total assets	72.6		%	72.1		%	70.8		%	71.3		%

_______________


(1)	~~Outstanding~~ Total loans, gross are outstanding loan principal balance net of unamortized deferred nonrefundable loan origination fees and loan origination costs, excluding the allowance for loan losses. There were no loans held for sale ~~and~~for the ~~allowance for loan losses.~~periods presented.


(2)	See Note 5 of our audited consolidated financial statements in the Form 10-K for the year ended December 31, 2019 and Note 45 of these unaudited interim consolidated financial statements for more details on our impairment models.


(3)	~~Outstanding~~ Total loans, net are outstanding loan principal balance net of unamortized deferred nonrefundable loan origination fees and loan origination costs, ~~excluding loans held for sale and~~ net of the allowance for loan losses.

The composition of our CRE loan portfolio by industry segment at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 is depicted in the following table:


(in thousands)	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Retail (1)	$	1,128,385	$	1,081,142	$	1,116,359	$	1,143,565
Multifamily	968,080		909,439		823,450		801,626
Office space	457,251		441,712		444,621		453,328
Land and construction	291,304		326,644		284,766		278,688
Hospitality	165,378		166,415		191,946		198,807
Industrial and warehouse	121,479		120,086		88,149		96,102
	$	3,131,877	$	3,045,438	$	2,949,291	$	2,972,116

_________


(1)	Includes loans generally granted to finance the acquisition or operation of non-owner occupied properties such as retail shopping centers, free-standing single-tenant properties, and mixed-use properties with a primary retail component, where the primary source of repayment is derived from the rental income generated from the use of the property by its tenants.

The table below summarizes the composition of our loan portfolio by type of loan as of the end of each period presented. International loans include transactions in which the debtor or customer is domiciled outside the U.S., even when the collateral is U.S. property. All international loans are denominated and payable in U.S. Dollars.


(in thousands)	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Domestic Loans:
Real Estate Loans
Commercial real estate (CRE)
Nonowner occupied	$	1,872,493	$	1,809,356
Non-owner occupied					$	1,841,075	$	1,891,802
Multi-family residential	968,080		909,439		823,450		801,626
Land development and construction loans	291,304		326,644		284,766		278,688
	3,131,877		3,045,439		2,949,291		2,972,116
Single-family residential	412,709		398,043		486,533		427,431
Owner occupied	836,334		777,022		938,511		894,060
	4,380,920		4,220,504		4,374,335		4,293,607
Commercial loans	1,123,362		1,306,792		1,202,426		1,190,193
Loans to depository institutions and acceptances (1)	20,006		19,965		16,587		16,547
Consumer loans and overdrafts (2)	73,674		73,155
Consumer loans and overdrafts (2) (3)					122,758		72,555
Total Domestic Loans	5,597,962		5,620,416		5,716,106		5,572,902

International Loans:
Real Estate Loans
Single-family residential ~~(3)~~(4)	122,854		135,438		103,180		111,671
Commercial loans	57,374		73,636		45,029		43,850
Loans to depository institutions and acceptances	5,000		49,000		10		5
Consumer loans and overdrafts (4)	29,565		41,685
Consumer loans and overdrafts (3) (5)					7,946		15,911
Total International Loans	214,793		299,759		156,165		171,437
Total Loan Portfolio	$	5,812,755	$	5,920,175	$	5,872,271	$	5,744,339

__________________


(1)	~~Secured by~~Mostly comprised of cash or U.S. Government securities.


(2)	Includes customers’ overdraft balances totaling ~~$0.8~~$0.2 million and ~~$1.0~~$1.3 million as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019, respectively.


(3)	There were no outstanding credit card balances as of June 30, 2020. At December 31, 2019, balances were mostly comprised of credit card extensions of credit to customers with deposits with the Bank. The Company phased out its legacy credit card products to further strengthen its credit quality.


(4)	Secured by real estate properties located in the U.S.


~~(4)~~(5)	International customers’ overdraft balances were de minimis at each of the dates presented.

~~Our strategy is to let foreign financial institution loans mature, and continue to divest Shared National Credits (“SNC”) where the Company does not have a direct relationship with the borrower.~~

As of June 30, ~~2019,~~2020, the loan portfolio ~~decreased $107.4~~increased $127.9 million, or ~~1.8%~~2.2%, to ~~$5.8~~$5.9 billion, as compared to ~~$5.9~~$5.7 billion at December 31, ~~2018. As part of our business strategy, loans~~2019. Loans to international customers, primarily from Latin America, declined by ~~$85.0~~$15.3 million, or ~~28.3%~~8.9%, as of June 30, ~~2019,~~2020, compared to December 31, ~~2018.~~2019. The domestic loan exposure ~~decreased $22.5~~increased $143.2 million, or ~~0.4%~~2.6%, as of June 30, ~~2019,~~2020, compared to December 31, ~~2018.~~2019. The ~~decline~~increase in total domestic loans includes net ~~decreases~~increases of ~~$183.4~~$59.1 million, $50.2 million, $44.5 million, $12.2 million in ~~Commercial~~single-family residential loans, ~~partially offset by net increases of $86.4 million, $59.3 million and $14.7 million in CRE~~consumer loans, owner occupied loans and commercial loans, respectively. This was partially offset by a decline of $22.8 million in domestic CRE, mainly driven by lower economic activity, and more stringent credit guidelines associated with the COVID-19 pandemic. The increase in commercial loans include approximately $214.1 million in PPP loans, originated during the second quarter of 2020, partially offset by lower economic activity in the first half of 2020 due to the COVID-19 pandemic. The increase in single-family residential loans ~~respectively. In the six months ended June 30, 2019, the decline in domestic loans~~ was mainly ~~driven by a $213.1~~attributable to the growth in jumbo mortgages. The increase in consumer loans includes $60 million ~~reduction~~ in ~~connection with~~high-yield indirect consumer loans purchased during the ~~sale~~first half of ~~non-relationship SNCs.~~2020.

As of June 30, 2020, loans under syndication facilities declined $84.9 million, or 15.1%, compared to December 31, 2019, mainly as a result of paydowns and the sale of a $11.9 million non-relationship syndicated loan. As of June 30, 2020, syndicated loans that financed highly leveraged transactions were ~~$36.9~~$18.5 million, or ~~0.6%~~0.3%, of total loans, compared to ~~$207.7~~$35.7 million, or ~~3.5%~~0.6%, of total loans as of December 31, ~~2018.~~

2019.

Foreign Outstanding

The table below summarizes the composition of our international loan portfolio by country of risk for the periods presented. All of our foreign loans are denominated in U.S. Dollars, and bear fixed or variable rates of interest based upon different market benchmarks plus a spread.


	June 30, 2019				December 31, 2018				June 30, 2020				December 31, 2019
	Net Exposure⁽¹⁾		% Total Assets		Net Exposure⁽¹⁾		% Total Assets		Net Exposure (1)		% Total Assets		Net Exposure (1)		% Total Assets
(in thousands, except percentages)
Venezuela (2)	$	137,414	1.73	%	$	157,162	1.93	%	$	93,770	1.1	%	$	112,297	1.4	%
Other (3)	77,379		0.98	%	142,597		1.77	%	62,395		0.8	%	59,140		0.7	%
Total	$	214,793	2.71	%	$	299,759	3.70	%	$	156,165	1.9	%	$	171,437	2.1	%

_________________


(1)	Consists of outstanding principal amounts, net of collateral of cash, cash equivalents or other financial instruments totaling ~~$20.6~~$11.9 million and ~~$19.5~~$15.2 million as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.


(2)	Includes mortgage loans for single-family residential properties located in the U.S. totaling ~~$116.2~~$93.4 million and ~~$129.0~~$104.0 million as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

~~(3)~~


(3)	Includes loans to borrowers in other countries which do not individually exceed one percent of total assets in any of the reported periods.

The maturities of our outstanding international loans were:


	June 30, 2019								December 31, 2018								June 30, 2020								December 31, 2019
	Less than 1 year		1-3 Years		More than 3 years		Total		Less than 1 year		1-3 Years		More than 3 years		Total		Less than 1 year		1-3 Years		More than 3 years		Total		Less than 1 year		1-3 Years		More than 3 years		Total
(in thousands)
Venezuela (1)	$	20,770	$	1,778	$	114,866	$	137,414	$	27,415	$	1,059	$	128,688	$	157,162	$	137	$	5,781	$	87,852	$	93,770	$	8,141	$	3,617	$	100,539	$	112,297
Other (2)	22,301		9,263		45,815		77,379		71,707		18,200		52,690		142,597		7,076		18,588		36,731		62,395		6,146		9,282		43,712		59,140
Total (3)	$	43,071	$	11,041	$	160,681	$	292,172	$	99,122	$	19,259	$	181,378	$	442,356	$	7,213	$	24,369	$	124,583	$	156,165	$	14,287	$	12,899	$	144,251	$	171,437

_________________


(1)	Includes mortgage loans for single-family residential properties located in the U.S. totaling ~~$116.2~~$93.4 million and ~~$129.0~~$104.0 million as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. ~~Based upon the diligence we customarily perform~~

(2)

Includes loans to ~~"know our customers" for anti-money laundering, OFAC and sanctions purposes, and a preliminary review~~borrowers in other countries which do not individually exceed one percent of total assets in any of the Executive Order issued by the President of the United States on August 5, 2019 and the related Treasury Department Guidance, we do not believe that the U.S. economic embargo on certain Venezuela persons will adversely affect our Venezuela customer relationships, generally.reported periods.

~~(2) Includes loans to borrowers in other countries which do not individually exceed one percent of total assets in any of the reported periods.~~


(3)	Consists of outstanding principal amounts, net of cash collateral, cash equivalents or other financial instruments totaling ~~$20.6~~$11.9 million and ~~$19.5~~$15.2 million as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

During the six months ended June 30, 2019, we continued the strategy to reduce the international commercial loan exposure. As a result, loans to international customers, mainly companies and financial institutions in Brazil, Colombia and other countries decreased $85.0 million, or 28.3%, in 2019 compared to 2018, mostly as a result of decline in Venezuela, Brazil and Colombia loan exposures.

Loan Quality

Allocation of Allowance for Loan Losses

In the following table, we present the allocation of the ~~allowance for loan losses~~ALL by loan segment at the end of the periods presented. The amounts shown in this table should not be interpreted as an indication that charge-offs in future periods will occur in these amounts or percentages. These amounts represent our best estimates of losses incurred, but not yet identified, at the reported dates, derived from the most current information available to us at those dates and, therefore, do not include the impact of future events that may or may not confirm the accuracy of

those estimates at the dates reported. Our ~~allowance for loan losses~~ALL is established using estimates and judgments, which consider the views of our regulators in their periodic examinations. We also show the percentage of each loan class, which includes loans in nonaccrual status.


	June 30, 2019					December 31, 2018					June 30, 2020					December 31, 2019
	Allowance			% of Loans in Each Category to Total Loans		Allowance			% of Loans in Each Category to Total Loans		Allowance			% of Loans in Each Category to Total Loans		Allowance			% of Loans in Each Category to Total Loans
(in thousands, except percentages)
Domestic Loans
Real estate	$	21,900		53.8	%	$	22,778		51.3	%	$	54,498		49.8	%	$	25,040		51.7	%
Commercial	25,334			35.5	%	29,278			37.0	%	56,783			38.9	%	22,132			38.1	%
Financial institutions	42			0.3	%	41			0.3	%	—			0.3	%	42			0.3	%
Consumer and others (1)	2,006			6.7	%	1,985			6.3	%	5,712			8.3	%	1,677			6.9	%
	49,282			96.3	%	54,082			94.9	%	116,993			97.3	%	48,891			97.0	%

International Loans (2)
Commercial	490			1.0	%	740			1.2	%	796			0.8	%	350			0.8	%
Financial institutions	18			0.1	%	404			0.8	%	—			—	%	—			—	%
Consumer and others (1)	7,614			2.6	%	6,536			3.1	%	1,863			1.9	%	2,982			2.2	%
	8,122			3.7	%	7,680			5.1	%	2,659			2.7	%	3,332			3.0	%

Total Allowance for Loan Losses	$	57,404		100.0	%	$	61,762		100.0	%	$	119,652		100.0	%	$	52,223		100.0	%
% of Total Loans	0.99		%			1.04		%			2.04		%			0.91		%

__________________

(1)

Includes: (i) credit card receivables to cardholders for whom charge privileges have been stopped as of ~~June 30,~~December 31, 2019; and (ii) mortgage loans for and secured by single-family residential properties located in the U.S.The total allowance for loan losses, after the charge-offs, for credit card receivables totaled $1.8 million at December 31, 2019. Outstanding credit card balances were repaid during the first quarter of 2020, therefore, there is no allowance for the credit card product as of June 30, 2020.


(2)	Includes transactions in which the debtor or customer is domiciled outside the U.S. and all collateral is located in the U.S.

In the first half of 2020, the shift in the allocation of the ALL was driven by the allocation of the loan loss provisions increase due to the estimated impact of the COVID-19 pandemic among the respective impacted portfolios, mostly domestic real estate, domestic commercial and domestic consumer. In addition, the shift in the allocation of the ALL reflects loan composition changes, primarily driven the purchase of domestic consumer loans and the reduction of the international credit cards.

Non-Performing Assets

In the following table, we present a summary of our non-performing assets by loan class, which includes non-performing loans by portfolio segment, both domestic and international, and other real estate owned, or OREO, at the dates presented. Non-performing loans consist of (i) nonaccrual ~~loans;~~loans where the accrual of interest has been discontinued; (ii) accruing loans 90 days or more contractually past due as to interest or principal; and (iii) restructured loans that are considered ~~“troubled debt restructurings” (“TDRs”).~~TDRs.


	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
(in thousands)
Non-Accrual Loans (1)
Domestic Loans:
Real Estate Loans
Commercial real estate (CRE)
Nonowner occupied	$	1,964	$	—
Multi-family residential	657		—
Non-owner occupied					$	8,426	$	1,936
Single-family residential	8,111		5,198		5,817		5,431
Owner occupied	10,528		4,983		11,828		14,130
	21,260		10,181		26,071		21,497
Commercial loans	10,032		4,772
Commercial loans (2)					48,961		9,149
Consumer loans and overdrafts	82		11		40		390
Total Domestic	31,374		14,964		75,072		31,036

International Loans: (2)
International Loans: (3)
Real Estate Loans
Single-family residential	1,321		1,491		2,158		1,860
Consumer loans and overdrafts	32		24		30		26
Total International	1,353		1,515		2,188		1,886
Total Non-Accrual Loans	$	32,727	$	16,479	$	77,260	$	32,922

Past Due Accruing Loans (3)
Domestic Loans:
Real Estate Loans
Single-family residential	$	—	$	54
Total Domestic	—		54
Past Due Accruing Loans (4)

International Loans:
Real Estate Loans
Single-family residential	—		365		—		—
Consumer loans and overdrafts	23		884		—		5
Total International	23		1,249		—		5
Total Past Due Accruing Loans	$	23	$	1,303	$	—	$	5

Total Non-Performing Loans	$	32,750	$	17,782	$	77,260	$	32,927
Other Real Estate Owned	—		367		42		42
Total Non-Performing Assets	$	32,750	$	18,149	$	77,302	$	32,969

__________________


(1)	Includes loan modifications that met the definition of TDRs that may be performing in accordance with their modified loan terms.As of June 30, 2020 and December 31, 2019, non-performing TDRs include $7.3 million and $9.8 million, respectively, in a multiple loan relationship to a South Florida borrower.


(2)	As of June 30, 2020, includes a $39.8 million commercial relationship placed in nonaccrual status during the second quarter of 2020.


(3)	Includes transactions in which the debtor or customer is domiciled outside the U.S., but where all collateral is located in the U.S.


~~(3)~~(4)	Loans past due 90 days or more but still accruing.

At June 30, ~~2019,~~2020, non-performing assets increased ~~$14.6~~$44.3 million, or ~~80.5%~~134.5%, compared to December 31, ~~2018.~~2019. The increase in non-performing assets was mainly due to the addition of a commercial loan relationship totaling $39.8 million, one CRE loan totaling $6.5 million, and due to multiple commercial and single family loans with individual balances below $0.5 million totaling $2.3 million, placed in non-accrual status during the first half of 2020. In addition, there were three commercial loans totaling $2.3 million placed in nonaccrual status during the first quarter of 2020. This increase was ~~mainly attributed to~~offset primarily by the ~~deterioration~~payoff of ~~a total of $11.6 million in a combination of CRE,~~one owner occupied ~~commercial~~loan totaling $1.9 million, one residential loan totaling $0.2 million and ~~residential loans to a South Florida customer in~~one consumer loan totaling $0.4 million; the ~~food wholesale industry whose sales in Puerto Rico have not recovered from Hurricanes Irma and Maria in 2017. This relationship is comprised~~charge-off of ~~four owner occupied~~six commercial loans totaling ~~$4.7~~$3.2 million, ~~one~~and the pay-down of two commercial loan totaling ~~$2.7~~$0.6 million and ~~one CRE loan of $2.0 million, which had been classified special mention since June 2018. The loan relationship also includes four~~three single family residential loans totaling ~~$2.2~~$0.6 million. ~~As of June 30, 2019, all the loans in the relationship were further downgraded to substandard and placed in non-accrual.~~

On July 30, 2019, the Company agreed to restructure certain CRE, owner occupied and commercial loans totaling $9.4 million in a multiple loan relationship with a South Florida customer. This TDR restructure consisted of extending repayment terms and adjusting future periodic payments, and the Company determined no additional impairment charges were necessary. Four residential loans, totaling $2.2 million, which are included in this loan relationship, were not modified. The Company believes the specific reserves associated with these CRE, owner occupied, commercial loans and residential loans, which total a $11.6 million impaired loan relationship as of June 30, 2019, are adequate to cover probable losses given current facts and circumstances. The Company will continue to closely monitor the performance of these loans under their modified terms.

~~Additionally, during the quarter ended June 30, 2019, non-performing loans also increased due to a $2.4 million commercial loan and a $0.7 million CRE loan placed in nonaccrual status.~~

We recognized no interest income on nonaccrual loans during the six months ended June 30, ~~2019~~2020 and ~~2018.~~2019. Additional interest income that we would have recognized on these loans had they been current in accordance with their original terms in the six months ended June 30, 2020 and 2019 ~~and 2018~~ was ~~$0.8~~$1.1 million and ~~$0.7~~$0.8 million, respectively.

The Company’s loans by credit quality indicators are summarized in the following table. We have no ~~purchased credit-impaired~~purchased-credit-impaired loans.


	June 30, 2019								December 31, 2018								June 30, 2020								December 31, 2019
(in thousands)	Special Mention		Substandard		Doubtful		Total (1)		Special Mention		Substandard		Doubtful		Total (1)		Special Mention		Substandard		Doubtful		Total (1)		Special Mention		Substandard		Doubtful		Total (1)
Real Estate Loans
Commercial Real Estate (CRE)
Nonowner occupied	$	6,251	$	1,964	$	—	$	8,215	$	6,561	$	222	$	—	$	6,783
Non-owner occupied																	$	2,127	$	7,242	$	1,936	$	11,305	$	9,324	$	762	$	1,936	$	12,022
Multi-family residential	—		657		—		657		—		—		—		—		—		—		—		—		—		—		—		—
Land development and construction loans																	7,196		—		—		7,196		9,955		—		—		9,955
	6,251		2,621		—		8,872		6,561		222		—		6,783		9,323		7,242		1,936		18,501		19,279		762		1,936		21,977
Single-family residential	—		9,432		—		9,432		—		7,108		—		7,108		—		8,127		—		8,127		—		7,291		—		7,291
Owner occupied	9,476		13,940		—		23,416		9,019		9,451		—		18,470		7,884		14,142		—		22,026		8,138		14,240		—		22,378
	15,727		25,993		—		41,720		15,580		16,781		—		32,361		17,207		29,511		1,936		48,654		27,417		22,293		1,936		51,646
Commercial loans	5,332		11,490		539		17,361		3,943		6,462		589		10,994
Commercial loans (2)																	5,664		35,211		20,822		61,697		5,569		8,406		2,669		16,644
Consumer loans and overdrafts	—		4,421		—		4,421		—		6,062		—		6,062		—		81		—		81		—		67		357		424
	$	21,059	$	41,904	$	539	$	63,502	$	19,523	$	29,305	$	589	$	49,417	$	22,871	$	64,803	$	22,758	$	110,432	$	32,986	$	30,766	$	4,962	$	68,714

__________

(1) There are no loans categorized as a “Loss” as of the dates presented.

(2) As of June 30, 2020, includes a $39.8 million in a commercial relationship placed in nonaccrual status and downgraded during the second quarter of 2020 ($20.5 million downgraded to substandard and $19.3 million downgraded to doubtful).

At June 30, ~~2019,~~2020, substandard loans increased ~~$12.6~~$34.0 million, or ~~43.0%~~110.6%, compared to December 31, ~~2018. The~~2019, mainly due to the downgrade of the $39.8 million commercial loan relationship mentioned above, $20.5 million of the total $39.8 million was downgraded to substandard, coupled with the downgrade of one multi-loan relationship totaling $7.2 million. Also, the increase was ~~mainly~~ attributed to the ~~deterioration~~addition of the $11.6 million of loans to a South Florida borrower in the food wholesale industry whose sales in Puerto Rico continue to be adversely affected by two hurricanes in 2017. These loans were placed on non-accrual when these were classified as substandard. Subsequently on July 30, 2019, the Company agreed to restructure certain CRE, owner occupied andten commercial loans ~~within this relationship~~ totaling ~~$9.4~~$3.9 million and eight single-family loans totaling $1.8 million. ~~Additionally,~~This increase was offset mainly by the ~~increase is attributed~~charge-off of six commercial loans totaling $3.0 million, the paydown of $4.1 million mainly due to ~~a $2.4 million commercial loan and a $0.7 million CRE loan placed in non-accrual status, offset by a $0.8~~$2.3 million owner-occupied ~~commercial real estate loan repayment within the period.~~properties and $1.1 million single family residential.

At June 30, ~~2019,~~2020, special mention loans ~~increased $1.5~~decreased $10.1 million, or ~~7.9%~~30.7%, compared to December 31, ~~2018. The increase is attributed to~~2019, mainly due to: (i) upgrades two pass of three CRE loans totaling $9.3 million, one owner occupied loan for $0.9 million and one commercial loan of $0.4 million; (ii) paydowns of one construction loan totaling $2.6 million, four commercial loans totaling ~~$3.9~~$1.2 million and (iii) the downgrade of three ~~owner-occupied~~ commercial ~~real estate~~ loans totaling ~~$5.4~~$1.9 million to substandard. This was partially offset by the downgrade to special mention of three commercial loans totaling $3.5 million, two CRE loans totaling $2.2 million and one ~~$1.8 million CRE~~owner-occupied loan ~~downgraded to special mention during the period, offset by the classification as substandard of~~totaling $0.8 million. All special mention loans remain current.

At June 30, 2020, doubtful loans increased by $17.8 million, or 358.7%, mainly driven by the downgrade of $19.3 million included in the ~~$11.6~~the aforementioned $39.8 million commercial loan relationship.

At December 31, 2019, approximately 95% of loans to a South Florida borrower previously discussed. These downgraded loans reflect individual loan performances which management believes do not reflect negative trends. Additionally, these downgraded loans are being monitoredour credit card holders were foreign, mostly Venezuelan, and ~~did not generate any additional provisions~~the card receivables were reflecting the stresses in ~~2019.~~

the Venezuelan economy. Since late 2016, and consistent with industry practice, credit cards held by ~~Venezuela~~Venezuelan residents with outstanding balances above the corresponding customer’s average deposit balances with the Bank ~~are~~were classified substandard and charging privileges ~~are~~were suspended. ~~At June 30,~~In April 2019, ~~and December 31, 2018, this resulted in approximately $4.3 million and $6.0 million, respectively, in credit card receivables classified substandard. At June 30, 2019 and December 31, 2018,~~ we had allowance for loan losses with respect to credit card balances of approximately $6.5 million and $5.4 million, respectively. At the beginning of 2018, the Company changed the monitoring of such credit cards and related deposit balances from quarterly to monthly. Deteriorating economic conditions in Venezuela could cause classified credit card balances, and charge offs to continue increasing.

~~Approximately 95% of~~revised our credit card ~~holders are foreign, mostly Venezuelan, and the card receivables were reflecting the stresses in the Venezuela economy. In April 2019, the Company revised its credit card strategy~~program to further ~~reduce its~~strengthen the Company’s overall credit ~~exposure to international credit card customers and reduce its credit card losses. The Company~~quality. We stopped charge privileges to ~~its smallest and~~our riskiest cardholders and required repayment of their balances by November 2019. ~~Other cardholders’~~In October 2019, we curtailed charge privileges ~~will end in October 2019~~to the remaining cardholders and ~~they will be~~ required ~~to repay all~~repayment of their balances by January 2020. ~~The Company reduced its credit card receivables from $33.9 million at~~All amounts deemed uncollectible were charged off during 2019. At December 31, ~~2018 to $26.1 million at June 30,~~ 2019, the outstanding balance and ~~increased during~~ the ~~second quarter of 2019 its~~assigned allowance for loan losses onafter the charge-offs was $11.1 million and $1.8 million, respectively. At December 31, 2019, there were no credit cards ~~by $1.2~~classified as substandard. There were no outstanding credit card balances as of June 30, 2020.

Due to the changes to our credit card products previously discussed, credit card charge-offs during the first half of 2020 totaled $0.4 million, ~~to a total~~all of ~~$6.5 million.~~which were already reserved. The Company ~~entered into an arrangement with~~experienced no unanticipated losses during the first half of 2020 as a ~~major U.S.-based global~~result of the discontinuation of its credit card ~~issuer~~products.

On March 26, 2020, the Company began offering customized loan payment relief options as a result of the impact of COVID-19, including interest payment deferral and ~~began referring its international customers~~forbearance options. Loans outstanding which have been modified under these programs totaled $1.1 billion as of June 30, 2020, relatively flat compared to balances reported as of May 1, 2020. As of June 30, 2020, loans modified under these programs on which the ~~U.S-based global card issuer in May.~~interest-only and/or forbearance period expired totaled $504.7 million, or 45.4% of total modified loans. The Company ~~expects~~collected payments due on $8.4 million of these loans through this date. Modified loans totaling $496.3 million have payments due by July 31, 2020. As of July 31, 2020, we have collected payments due on approximately $452.1 million of these loans. In accordance with accounting and regulatory guidance, loans to ~~market this program to all its other foreign customers in Fall 2019.~~borrowers benefiting from these measures are not considered Troubled Debt Restructurings (“TDRs”). The Company is ~~currently negotiating a similar referral program with another card issuer for its domestic customers.~~closely monitoring the performance of these loans under the terms of the temporary relief granted.

While the economic disruption caused by the COVID-19 pandemic is expected to impact the Company's credit quality, it is difficult to estimate the potential outcome due to the uncertain duration and scope of the slowdown in U.S. economic activity. The Company ~~believes these changes~~ will continue to ~~reduce~~closely monitor the performance of loans to borrowers in impacted sectors, and ~~ultimately eliminate~~will reassess its credit exposure and losses on international cards. The discontinuance of credit cards and repayment terms on existing credit card balances, however, may result in higher initial credit loss rates on existing card balances, until these balances are paid or charged-off.provisions as conditions evolve.

Potential problem loans, which are accruing loans classified as substandard and are less than 90 days past due, at June 30, ~~2019~~2020 and December 31, ~~2018~~2019, are as follows:


(in thousands)	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Real estate loans
Commercial real estate (CRE)
Nonowner occupied	$	—	$	222
Non-owner occupied					$	751	$	762
Single-family residential					151		—
Owner occupied	3,411		4,468		2,314		110
	3,411		4,690		3,216		872
Commercial loans	1,997		2,433		7,073		1,926
Consumer loans and overdrafts (1)	4,285		5,144		12		9
	$	9,693	$	12,267	$	10,301	$	2,807

__________

(1) ~~Includes~~Corresponds to international consumer ~~loans of approximately $4.3 million and $5.1 million at each of the dates presented.~~loans.

At June 30, ~~2019,~~2020, total potential problem loans ~~decreased $2.6~~increased $7.5 million, or ~~21.0%~~267.0%, compared to December 31, ~~2018.~~2019. The ~~decrease~~increase is mainly attributed to ~~a $0.9 million decrease in credit cards past due and a $0.8 million owner-occupied commercial real estate loan repayment, as well as repayments of other smaller loans during the period.~~one multi-loan relationship totaling $7.2 million.

Securities

The following table sets forth the book value and percentage of each category of securities at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. The book value for debt securities classified as available for sale and equity securities represents fair value and the book value for debt securities classified as held to maturity represents amortized cost.

June 30, 2019 December 31, 2018
Amount % Amount %
(in thousands, except percentages)

Securities held to maturity
U.S. Government sponsored enterprise debt $ 78,448
4.8 % $ 82,326
4.7 %
U.S. Government agency debt 2,792
0.1 % 2,862
0.2 %
$ 81,240
4.9 % $ 85,188
4.9 %
Securities available for sale:
U.S. Government sponsored enterprise debt $ 933,670
56.6 % $ 820,779
47.1 %
Corporate debt (1) 271,706
16.5 % 352,555
20.3 %
U.S. Government agency debt 198,740
12.0 % 216,985
12.5 %
Municipal bonds 73,327
4.4 % 160,212
9.2 %
Mutual funds (2) 23,779
1.4 % 23,110
1.3 %
Commercial paper —
— % 12,410
0.7 %
$ 1,501,222
90.9 % $ 1,586,051
91.1 %
Other securities (3):
FHLB stock $ 55,115
3.4 % $ 57,179
3.3 %
Federal Reserve Bank stock 13,055
0.8 % 13,010
0.7 %
$ 68,170
4.2 % $ 70,189
4.0 %
$ 1,650,632
100.0 % $ 1,741,428
100.0 %



	June 30, 2020				December 31, 2019
	Amount		%		Amount		%
(in thousands, except percentages)
Debt securities available for sale:
U.S. government agency debt	$	232,454	13.9	%	$	228,397	13.1	%
U.S. government sponsored enterprise debt	831,920		49.6	%	933,112		53.6	%
Corporate debt (1) (2)	386,109		23.1	%	252,836		14.5	%
U.S. Treasury debt	2,515		0.2	%	104,236		6.0	%
Municipal bonds	66,786		4.0	%	50,171		2.9	%
	$	1,519,784	90.8	%	$	1,568,752	90.1	%

Debt securities held to maturity (3)	$	65,616	3.9	%	$	73,876	4.3	%

Equity securities with readily determinable fair value not held for trading (4)	24,425		1.5	%	23,848		1.4	%

Other securities (5):	$	64,986	3.8	%	$	72,934	4.2	%
	$	1,674,811	100.0	%	$	1,739,410	100.0	%

__________________

(1)

June 30, 2020 and December 31, 2019 ~~includes $12.1~~include $16.3 million and $5.2 million, respectively, in “investment-grade” quality debt securities issued by foreign corporate ~~entities~~entities. The securities issuers were from ~~Europe~~Canada and Japan in three different sectors at June 30, 2020, and from Japan in the financial services ~~sector.~~sector at December 31, ~~2018 includes $36.2 million in obligations issued by corporate entities from Europe and Japan in three different sectors.~~2019. The Company limits exposure to foreign investments based on cross border exposure by country, risk appetite and policy. All foreign investments are denominated in U.S. Dollars.


(2)	~~Includes a publicly offered investment company which seeks current income~~As of June 30, 2020 and ~~makes investments that qualify for Community Reinvestment Act (“CRA”) purposes.~~December 31, 2019, debt securities in the financial services sector issued by domestic corporate entities represent 2.4% and 1.3% of our total assets, respectively.


(3)	Includes securities issued by U.S. government and U.S. government sponsored agencies.


(4)	Includes an open-end fund incorporated in the U.S. The Fund's objective is to provide a high level of current income consistent with the preservation of capital and investments deemed to be qualified under the Community Reinvestment Act of 1977.


(5)	Includes investments in FHLB and Federal Reserve Bank stock. Amounts correspond to original cost at the date presented. Original cost approximates fair value because of the nature of these investments.

The following tables set forth the book value, scheduled maturities and weighted average yields for our securities portfolio at June 30, ~~2019~~2020 and December 31, ~~2018~~2019. Similar to the table above, the book value for securities available for sale and equity securities is equal to fair market value and the book value for debt securities held to maturity is equal to amortized cost.


June 30, 2019
June 30, 2020																									June 30, 2020
(in thousands, except percentages)	Total				Less than a year				One to five years				Five to ten years				Over ten years				No maturity				Total				Less than a year				One to five years				Five to ten years				Over ten years				No maturity
(in thousands, except percentages)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Securities held to maturity
U.S. Government sponsored enterprise debt	$	78,448	2.72	%	$	—	—	%	$	—	—		$	—	—	%	$	78,448	2.72	%	$	—	—	%
U.S. Government agency debt	2,792		2.74		—		—		—		—		—		—		2,792		2.74		—		—
	$	81,240	2.72		$	—	—		$	—	—		$	—	—		$	81,240	2.72		$	—	—
Securities available for sale
Debt securities available for sale
U.S. Government sponsored enterprise debt	$	933,670	2.87	%	$	675	3.94	%	$	26,827	2.67	%	$	108,013	2.93	%	$	798,155	2.87	%	$	—	—	%	$	831,920	2.62	%	$	1,199	2.79	%	$	27,583	2.33	%	$	104,945	2.69	%	$	698,193	2.62	%	$	—	—	%
Corporate debt-domestic	259,612		3.11		43,078		2.63		170,345		3.07		46,189		3.72		—		—		—		—		369,788		3.21	%	77,836		3.05	%	132,054		2.50	%	139,597		3.67	%	20,301		5.30	%	—		—	%
U.S. Government agency debt	198,740		3.06		529		2.51		9,262		3.23		18,066		2.85		170,883		3.07		—		—		232,454		2.11	%	45		3.52	%	10,815		1.70	%	19,011		1.63	%	202,583		2.18	%	—		—	%
Municipal bonds	73,327		3.23		—		—		—		—		6,888		2.99		66,439		3.25		—		—		66,786		3.11	%	—		—	%	—		—	%	47,652		3.33	%	19,134		2.56	%	—		—	%
Corporate debt-foreign	12,094		3.48		—		—		12,094		3.48		—		—		—		—		—		—		16,321		2.89	%	—		—	%	5,212		1.30	%	11,109		3.63	%	—		—	%	—		—	%
Mutual funds	23,779		2.37		—		—		—		—		—		—		—		—		23,779		2.37
Commercial paper	—		—		—		—		—		—		—		—		—		—		—		—
U.S. treasury securities																									2,515		0.34	%	—		—	%	2,515		0.34	%	—		—	%	—		—	%	—		—	%
																									$	1,519,784	2.71	%	$	79,080	3.05	%	$	178,179	2.36	%	$	322,314	3.18	%	$	940,211	2.58	%	$	—	—	%

Debt securities held to maturity																									$	65,616	2.38	%	$	—	—	%	$	—	—	%	$	11,515	1.85	%	$	54,101	2.49	%	$	—	—	%

Equity securities with readily determinable fair value not held for trading																									24,425		2.05	%	—		—		—		—		—		—		—		—		24,425		2.05	%
	$	1,501,222	2.95		$	44,282	2.65		$	218,528	3.05		$	179,156	3.13		$	1,035,477	2.93		$	23,779	2.37
Other securities																									$	64,986	5.65	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	64,986	5.65	%
FHLB stock	$	55,115	6.54	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	55,115	6.54	%
Federal Reserve Bank stock	13,055		6.08		—		—		—		—		—		—		—		—		13,055		6.08
	$	68,170	6.45		$	—	—		$	—	—		$	—	—		$	—	—		$	68,170	6.45		$	1,674,811	2.80	%	$	79,080	3.05	%	$	178,179	2.36	%	$	333,829	3.13	%	$	994,312	2.58	%	$	89,411	4.66	%
	$	1,650,632	3.08	%	$	44,282	2.65	%	$	218,528	3.05	%	$	179,156	3.13	%	$	1,116,717	2.91	%	$	91,949	5.40	%

December 31, 2018
(in thousands, except percentages) Total Less than a year One to five years Five to ten years Over ten years No maturity
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
Securities held to maturity
U.S. Government sponsored enterprise debt $ 82,326
2.84 % $ —
— % $ —
—
$ —
— % $ 82,326
2.84 % $ —
— %
U.S. Government agency debt 2,862
2.73
—
—
—
—
—
—
2,862
2.73
—
—
$ 85,188
2.84
$ —
—
$ —
—
$ —
—
$ 85,188
2.84
$ —
—
Securities available for sale
U.S. Government sponsored enterprise debt $ 820,779
2.70 % $ 11
5.16 % $ 29,807
2.70 % $ 86,654
2.78 % $ 704,307
2.69 % $ —
— %
Corporate debt-domestic 316,387
3.12
40,804
2.66
249,709
3.17
25,874
3.35
—
—
—
—
U.S. Government agency debt 216,985
2.83
1,081
2.70
10,068
2.61
21,113
2.71
184,723
2.86
—
—
Municipal bonds 160,212
3.11
—
—
—
—
29,397
3.02
130,815
3.13
—
—
Corporate debt-foreign 36,168
3.38
—
—
36,168
3.38
—
—
—
—
—
—
Mutual funds 23,110
2.32
—
—
—
—
—
—
—
—
23,110
2.32
Commercial paper 12,410
2.77
12,410
2.77
—
—
—
—
—
—
—
—
$ 1,586,051
2.85
$ 54,306
2.69
$ 325,752
3.13
$ 163,038
2.90
$ 1,019,845
2.78
$ 23,110
2.32
Other securities
FHLB stock $ 57,139
6.19 % $ —
— % $ —
— % $ —
— % $ —
— % $ 57,139
6.19 %
Federal Reserve Bank stock 13,050
5.69
—
—
—
—
—
—
—
—
13,050
5.69
$ 70,189
6.10
$ —
—
$ —
—
$ —
—
$ —
—
$ 70,189
6.10
$ 1,741,428
2.98 % $ 54,306
2.69 % $ 325,752
3.13 % $ 163,038
2.90 % $ 1,105,033
2.78 % $ 93,299
5.16 %



December 31, 2019
(in thousands, except percentages)	Total				Less than a year				One to five years				Five to ten years				Over ten years				No maturity
(in thousands, except percentages)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield

Debt securities available for sale
U.S. government sponsored enterprise debt	933,112		2.76	%	2,296		3.81	%	23,781		2.51	%	113,341		2.83	%	793,694		2.75	%	—		—	%
Corporate debt-domestic	247,602		2.97		38,270		2.59		140,945		2.90		68,387		3.34		—		—		—		—
U.S. government agency debt	228,397		2.76		133		2.46		9,903		2.53		28,195		2.82		190,166		2.76		—		—
U.S. Treasury debt securities	104,236		2.07		6,765		1.61		—		—		—		—		97,471		2.10		—		—
Municipal bonds	50,171		3.29		—		—		—		—		29,371		3.23		20,800		3.38		—		—
Corporate debt-foreign	5,234		2.82		—		—		5,234		2.82		—		—		—		—		—		—
	1,568,752		2.76		47,464		2.51		179,863		2.83		239,294		3.02		1,102,131		2.71		—		—

Debt securities held to maturity	73,876		2.50	%	—		—		—		—		—		—		73,876		2.50	%	—		—
Equity securities with readily determinable fair value not held for trading	23,848		2.13	%	—		—		—		—		—		—		—		—		23,848		2.13	%

Other securities	72,934		6.02	%	—		—		—		—		—		—		—		—		72,934		6.02	%
	$	1,739,410	2.88	%	$	47,464	2.51	%	$	179,863	2.83	%	$	239,294	3.02	%	$	1,176,007	2.69	%	$	96,782	5.06	%

The investment portfolio’s average duration was ~~3.1~~2.6 years at June 30, ~~2019~~2020 and ~~3.4~~3.8 years at December 31, ~~2018~~2019. These estimates are computed using multiple inputs that are subject, among other things, to changes in interest rates and other factors that may affect prepayment speeds. Contractual maturities of investment securities are adjusted for anticipated prepayments of amortizing U.S. Government sponsored agency debt securities and U.S. Government sponsored enterprise debt securities, which shorten the average lives of these investments.

Liabilities

Total liabilities ~~decreased $256.5~~increased $149.8 million, or ~~3.5%~~2.1%, to ~~$7.1~~$7.3 billion at June 30, ~~2019~~2020 compared to ~~$7.4~~$7.2 billion at December 31, ~~2018.~~2019. This ~~decrease~~ was primarily driven by ~~lower~~$267.6 million, or 4.6%, in higher total deposits, mainly the result of noninterest bearing deposits, and ~~repayments on~~$58.4 million outstanding amount of Senior Notes issued in the second quarter of 2020. These increases were partially offset by a $185.0 million, or 15.0%, decrease in advances from the ~~FHLB.~~FHLB and the $28.1 million redemption of junior subordinated debentures in the first quarter of 2020. See “Capital Resources and Liquidity Management” for more detail on the issuance of Senior Notes and the redemption of trust preferred securities and related junior subordinated debt.

Deposits

Total deposits ~~decreased $213.3~~increased $267.6 million, or ~~3.5%~~4.6%, to $6.0 billion at June 30, 2020 compared to $5.8 billion at ~~June 30, 2019 compared to $6.0 billion at~~ December 31, ~~2018.~~2019. In the six months ended June 30, ~~2019, decreases~~2020, increases of ~~$105.0~~$193.1 million, or 25.3%, in noninterest bearing transaction accounts, $88.3 million, or 8.0%, in interest bearing deposits, ~~$77.9~~and $13.7 million, ~~in savings and money market deposit accounts and $47.4 million~~or 0.6% in time deposits were partially offset by ~~a $16.9~~decreases $27.6 million, or 1.9%, in savings and money market deposit accounts. The increase in ~~noninterest bearing transaction accounts. These changes~~deposits was mainly driven by: (i) the funds from the PPP loans originated during the second quarter of 2020, which small business customers have not fully utilized, totaling $132.7 million as of June 30, 2020; (ii) $67.8 million growth in reciprocal deposit account balances in the first half of 2020, and (iii) higher capture of online CDs. During the second quarter of 2020, the Company increasingly offered the reciprocal deposit product to certain customers who want to make their deposits ~~and the deposit mix were largely affected~~in excess of $250,000 fully eligible for FDIC insurance. This was partially offset by declines in deposits from Venezuelan resident customers, as discussed below. The ~~decrease of $47.4~~$13.7 million increase in time deposits since December 31, 2019 includes an increase of $88.2 million in retail time deposits partially offset by a decline of ~~$23.5~~$74.5 million in brokered time ~~deposits and a decrease of $23.8 million in retail time~~ deposits. The ~~decrease~~increase in retail time deposits ~~resulted from our strategic decision~~was mainly due to ~~decrease the promotional interest rates we paid.~~an increase of $90.9 million , or 66.1%, in online deposits compared to December 31, 2019. We continue to focus our efforts to retain customers with higher probabilities of renewal at ~~lower-than-market~~lower market rates. ~~Also, we have implemented a strategy for renewing CDs with lower probability of renewals through our promotions.~~ These efforts led to time deposit renewals of approximately ~~$211.2~~$224.0 million in the first half of ~~2019~~2020 at rates that were lower than the highest rates paid in our markets.

Deposits by Country of Domicile

The following table shows deposits by country of domicile of the depositor as of the dates ~~presented.~~presented and the changes during the period.


(in thousands)	June 30, 2019		December 31, 2018
									Change
(in thousands, except percentages)					June 30, 2020		December 31, 2019		Amount			%
Deposits
Domestic	$	3,014,269	$	3,001,366
Domestic (1) (2)					$	3,432,971	$	3,121,827	$	311,144		10.0	%
Foreign:
Venezuela ~~(1)~~(3)	2,465,718		2,694,690		2,202,340		2,270,970		(68,630		)	(3.0	)%
Others	339,394		336,630		389,391		364,346		25,045			6.9	%
Total foreign	2,805,112		3,031,320		2,591,731		2,635,316		(43,585		)	(1.7	)%
Total deposits	$	5,819,381	$	6,032,686	$	6,024,702	$	5,757,143	$	267,559		4.6	%

_________________


(1)	Includes brokered deposits of $587.9 million and $682.4 million at June 30, 2020 and December 31, 2019, respectively.


(2)	Domestic deposits, excluding brokered, were up $405.6 million or 16.6%, compared to December 31, 2019.

(3)

Based upon the diligence we customarily perform to "know our customers" for anti-money laundering, OFAC and sanctions purposes, and a ~~preliminary~~ review of the Executive Order issued by the President of the United States on August 5, 2019 and the related Treasury Department Guidance, we do not believe that the U.S. economic embargo on certain ~~Venezuela~~Venezuelan persons will adversely affect our ~~Venezuela~~Venezuelan customer relationships, generally.

Our domestic deposits have increased almost every year since 2014, while our total foreign deposits, especially deposits from Venezuelan residents, have declined during the same period. Most of the Venezuelan withdrawals from deposit accounts at the Bank are believed to be due to the effect of adverse economic conditions in Venezuela on our Venezuelan resident customers. In the second quarter of 2020, the pace of utilization of deposits from our Venezuelan customers declined mainly due to lower economic activity in their country currently attributable to the COVID-19 pandemic.

Our other foreign deposits include deposits from non-Venezuelan affiliates of the Former Parent, and do not include deposits from ~~Venezuelans.~~

~~The following table shows the amounts and percentage changes in our domestic and foreign deposits, including~~ Venezuelan resident ~~customer deposits, for the six months ended June 30, 2019 and the year ended December 31, 2018.~~customers.

Six Months Ended Year Ended
(in thousands, except percentages) June 30, 2019 December 31, 2018
Amount % Amount %
Deposits
Domestic $ 12,903
0.4 % $ 178,567
6.3 %
Foreign:
Venezuela (228,972 ) (8.5 )% (453,221 ) (14.4 )%
Others 2,764
0.8 % (15,633 ) (4.4 )%
Total foreign (226,208 ) (7.5 )% (468,854 ) (13.4 )%
Total deposits $ (213,305 ) (3.5 )% $ (290,287 ) (4.6 )%

During the six months ended June 30, ~~2019,~~2020, deposits from customers domiciled in Venezuela decreased by ~~$229.0~~$68.6 million, or ~~8.5%~~3.0%, to ~~$2.5~~$2.2 billion, compared to December 31, ~~2018. In~~2019. While customers in Venezuela continue to use their deposits to cover every day expenses, the pace of utilization of these deposits further declined during the second quarter of 2020 attributable the lower economic activity in their country currently attributable to the COVID-19 pandemic.

During the first half of 2020, foreign deposits, which include deposits from other countries in addition to Venezuela, decreased by $43.6 million or 1.7%, compared to December 31, 2019, ~~as living conditions in Venezuela remain difficult, our Venezuelan resident customers continued to rely on their U.S. Dollar savings to fund daily living expenses. The annual~~representing an annualized decline rate of ~~decline~~3.3% in ~~our Venezuela deposits during~~ the first ~~six months~~half of ~~2019 was higher~~2020 compared to ~~that realized~~an annualized decline rate of 13.1% during ~~2018. The annualized international deposit runoff rate was 14.4% in~~2019. We attributed these results to the ~~second quarter~~combination of ~~2019. As we expect this runoff to continue into the next few quarters, we continue to proactively focus on growing~~ our core domestic deposits, while seeking to reduce attrition in our valued Venezuelan customers’ deposits, by emphasizing and rewarding strong multi-product relationships. We launched the “Amerant Relationship Rewards Program” in July 2019, which focuses on expanding client relationships through tiered reward cash incentives to qualifying customers, and we have realigned our incentive compensation to promote our relationship-driven model and increase core deposits from our commercial customer base. We are also actively working to increase ourteam's sales efforts capturing more share of wallet, with the lower pace of ~~select high net worth international~~the economic activity in Venezuela as a result of the COVID-19 pandemic.

Fostering deeper relationships with existing customers ~~with whom we maintain strong long-term relationships.~~to capture additional share of wallet remains a priority, and the Company continues to enhance its customer engagement initiatives, including increased targeted call campaigns and providing relevant training to its sales teams in support of these efforts. The Company’s successful participation in the SBA’s PPP has introduced us to prospective commercial lending opportunities and new customer deposit relationships which will be strengthened by offering products and services that address the needs of these customers.

The Bank uses the Federal Financial Institutions Examination Council’s (the “FFIEC”) Uniform Bank Performance Report (the “UBPR”) definition of “core deposits”, which exclude brokered time deposits and retail time deposits of ~~$250,000 or more.~~more than $250,000. Our core deposits were ~~$4.5~~$4.7 billion and ~~$4.7~~$4.3 billion as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Core deposits represented ~~76.7%~~77.2% and ~~77.5%~~75.4% of our total deposits at those dates, respectively. The decline in core deposits since December 31, 2018 resulted primarily from Venezuelan resident customers drawing down their account balances as mentioned above, partially offset by increases in domestic deposits.

We utilize brokered deposits and, as of June 30, ~~2019,~~2020, we had ~~$618.6~~$587.9 million in brokered deposits, which represented ~~10.6%~~9.8% of our total ~~deposits.~~deposits at that date. Our June 30, ~~2019~~2020, brokered deposits were down ~~$23.5~~$94.5 million, or ~~3.7%~~13.8%, compared to ~~$642.1~~$682.4 million as of December 31, ~~2018. This decrease reflects~~2019, mainly due to the ~~continuation of our planned decrease in~~matured brokered CDs ~~deposits.~~which were not replaced during the first half of 2020. The Company has not historically sold brokered CDs in denominations over $100,000.

Large Fund Providers

At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, our large fund providers, defined as third-party customer relationships with balances of over $10 million, included ~~nine~~eleven and ~~six~~eight deposit relationships, respectively, with total balances of ~~$131.1~~$217.3 million and ~~$74.4~~$116.9 million, respectively. As of June 30, 2020, the total $217.3 million in relationships with balances over $10 million includes $50.0 million in reciprocal deposits. This $50.0 million in reciprocal deposits are part of the previously mentioned $67.8 million growth in reciprocal deposit account balances in the first half of 2020. Additionally, deposits from ~~our~~the Company’s Former Parent or its non-U.S. affiliates at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 totaled ~~$5.9~~$11.1 million and ~~$9.6~~$7.9 million, respectively. ~~These deposits of our Former Parent and its non-U.S. affiliates are expected to continue to decline further in 2019.~~

Large Time Deposits by Maturity

The following table sets forth the maturities of our time deposits with individual balances equal to or greater than $100,000 as of June 30, 2020 and December 31, 2019:


	June 30, 2019				June 30, 2020				December 31, 2019
(in thousands, except percentages)
Less than 3 months	$	281,653	20.3	%	$	323,709	21.5	%	$	291,075	20.4	%
3 to 6 months	203,195		14.6	%	343,480		22.8	%	358,061		25.1	%
6 to 12 months	485,987		35.0	%	479,385		31.8	%	393,555		27.6	%
1 to 3 years	202,649		14.6	%	231,786		15.4	%	181,105		12.7	%
Over 3 years	216,532		15.5	%	130,395		8.5	%	204,303		14.2	%
Total	$	1,390,016	100.0	%	$	1,508,755	100.0	%	$	1,428,099	100.0	%

Short-Term Borrowings

In addition to deposits, we use short-term borrowings, such as FHLB advances and borrowings from other banks, as a source of funds to meet the daily liquidity needs of our customers and fund growth in earning assets. Short-term borrowings have maturities of 12 months or less as of the reported period-end. There were no outstanding short-term borrowings at June 30, 2020. All of our outstanding short-term borrowings at ~~June 30, 2019 and~~ December 31, ~~2018~~2019 correspond to FHLB advances.

The following table sets forth information about the outstanding amounts of our short-term borrowings at the close of, and for the six months ended June 30, ~~2019~~2020 and for the year ended December 31, ~~2018.~~2019. There were no repurchase agreements outstanding as of June 30, 2020 and December 31, 2019.


	June 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
(in thousands, except percentages)
Outstanding at period-end	$	600,000		$	440,000		$	—		$	285,000
Average amount	503,333			505,417			167,500			478,333
Maximum amount outstanding at any month-end	600,000			632,000			300,000			600,000
Weighted average interest rate:
During period	2.46		%	2.10		%	1.45		%	2.29		%
End of period	2.35		%	2.52		%	—		%	1.93		%

Return on Equity and Assets

The following table shows annualized return on average assets, return on average equity, and average equity to average assets ratio for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(in thousands, except percentages and per share data)

Net income $ 12,857
$ 10,423
$ 25,928
$ 19,852
Basic earnings per common share 0.30
0.25
0.61
0.47
Diluted earnings per common share (1) 0.30
0.25
0.60
0.47

Average total assets $ 7,867,120
$ 8,419,040
$ 7,964,677
$ 8,413,434
Average stockholders' equity 786,123
748,024
773,451
747,905
Net income / Average total assets (ROA) 0.66 % 0.50 % 0.66 % 0.47 %
Net income / Average stockholders' equity (ROE) 6.56 % 5.57 % 6.76 % 5.31 %
Average stockholders' equity / Average total assets ratio 9.99 % 8.88 % 9.71 % 8.89 %

Adjusted net income (2) $ 15,005
$ 14,142
$ 28,808
$ 25,831
Adjusted earnings per common share (2) 0.35
0.33
0.68
0.61
Adjusted earnings per diluted common share (2) 0.35
0.33
0.67
0.61

Adjusted net income / Average total assets (Adjusted ROA) (2) 0.77 % 0.67 % 0.73 % 0.61 %
Adjusted net income / Average stockholders' equity (Adjusted ROE) (2) 7.66 % 7.56 % 7.51 % 6.91 %



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(in thousands, except percentages and per share data)
Net (loss) income	$	(15,279	)	$	12,857		$	(11,897	)	$	25,928
Basic (loss) earnings per common share	(0.37		)	0.30			(0.28		)	0.61
Diluted (loss) earnings per common share (1)	(0.37		)	0.30			(0.28		)	0.60

Average total assets	$	8,148,199		$	7,867,120		$	8,049,526		$	7,964,677
Average stockholders' equity	852,040			786,123			847,875			773,451
Net (loss) income / Average total assets (ROA)	(0.75		)%	0.66		%	(0.30		)%	0.66		%
Net (loss) income / Average stockholders' equity (ROE)	(7.21		)%	6.56		%	(2.82		)%	6.76		%
Average stockholders' equity / Average total assets ratio	10.46 %			9.99		%	10.53 %			9.71		%

Adjusted net (loss) income (2)	$	(14,234	)	$	15,005		$	(10,572	)	$	28,808
Adjusted (loss) earnings per common share (2)	(0.34		)	0.35			(0.25		)	0.68
Adjusted (loss) earnings per diluted common share (2)	(0.34		)	0.35			(0.25		)	0.67

Adjusted net (loss) income / Average total assets (Adjusted ROA) (2)	(0.70		)%	0.77		%	(0.26		)%	0.73		%
Adjusted net (loss) income / Average stockholders' equity (Adjusted ROE) (2)	(6.72		)%	7.66		%	(2.51		)%	7.51		%

__________________

(1)

As of June 30, 2020 and 2019 potential dilutive instruments consisted of unvested shares of restricted stock and restricted stock units mainly related to the Company’s IPO in 2018, totaling 491,360 and 789,652, respectively. As of June 30, 2020, potential dilutive instruments were not included in the diluted earnings per share computation because the Company reported a net loss and their inclusion would have an antidilutive effect. As of June 30, 2019, potential dilutive instruments included 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the Company’s IPO and 1,299 additional shares of restricted stock issued in January 2019. As of June 30, 2019, these 738,138 unvested shares of restricted stock were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, ~~in the three and six months ended June 30, 2019,~~ and had a dilutive effect in per share ~~earnings in the three (not shown due to rounding) and six months ended June 30, 2019. We had no outstanding dilutive instruments as of June 30, 2018.~~earnings.


(2)	See “Selected Financial Information” for an explanation of certain non-GAAP financial measures and see “Non-GAAP Financial Measures Reconciliation” for a reconciliation of the non-GAAP financial measures to their GAAP counterparts.

During the three and six ~~month periods~~months ended June 30, ~~2019,~~2020, basic and diluted ~~earnings~~loss per share ~~increased as a~~is the result of ~~higher~~the net ~~income~~loss recorded in the three and six ~~month periods~~months ended June 30, ~~2019 compared to the same periods one year ago.~~

2020.

Capital Resources and Liquidity Management

Capital Resources.

Stockholders’ equity is influenced primarily by earnings, dividends, if any, and changes in accumulated other comprehensive income ~~or loss (AOCI/AOCL)~~(AOCI) caused primarily by fluctuations in unrealized holding gains or losses, net of taxes, on debt securities available for ~~sale securities. AOCI/AOCL~~sale. AOCI is not included for purposes of determining our capital for bank regulatory purposes.

Stockholders’ equity ~~increased $59.0~~decreased $4.5 million, or ~~7.9%~~0.5%, to ~~$806.4~~$830.2 million as of June 30, ~~2019 as~~2020 compared to $834.7 million as of December 31, ~~2018,~~2019, primarily due ~~to $25.9~~to: (i) $11.9 million of net ~~income~~loss in the six months ended June 30, ~~2019,~~2020, and (ii) $15.2 million repurchase of shares of Class B common stock completed in the first quarter of 2020. This was partially offset by a ~~$29.3~~$21.5 million increase in AOCI resulting primarily from a higher valuation of debt securities available for sale compared to December 31, ~~2018,~~2019.

Class B Common Stock Repurchase. On February 14 and February 21, 2020, the ~~Company’s amortization~~Company repurchased an aggregate of ~~stock-based compensation~~932,459 shares of its outstanding Class B Common Stock in two privately negotiated transactions for an aggregate purchase price of $15.2 million, including $0.3 million in broker fees and other expenses. These 932,459 shares of Class B common stock were recorded as treasury stock under the cost method. The Company used available cash to fund these repurchases.

Cancellation of Treasury Shares. In March 2020, Company’s Board of Directors authorized the cancellation of all 4,464,916 shares of Class B Common Stock previously held as treasury stock, including shares repurchased during 2018, ~~restricted stock award related to the IPO. The higher valuation of securities available for sale during~~ 2019 ~~caused the Company’s deferred tax assets to decline approximately $9.3 million, or 57.0%, to $7.0 million as of June 30, 2019, as the unrealized gains~~ and ~~losses included in AOCI are reported in stockholder’s equity on an after-tax basis.~~2020, effective March 31, 2020.

Liquidity Management.

At June 30, 2020 and December 31, 2019, the Company had ~~$1.1~~$1.05 billion and $1.24 billion, respectively, of outstanding advances from the ~~FHLB and other borrowings, compared to $1.2 billion at December 31, 2018.~~FHLB. At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had an additional ~~$1.2~~$1.4 billion and $1.1 billion, respectively, available under FHLB facilities. During the six months ended June 30, ~~2019,~~2020, the Company repaid ~~$630~~$885 million of outstanding advances from the FHLB, and ~~other borrowings, and obtained new borrowing proceeds of $590~~borrowed $700 million from ~~these sources.~~this source. There were no other borrowings as of June 30, 2020 and December 31, 2019.

The following table summarizes the composition of our FHLB advances by type of interest rate:


	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
(in thousands)
Advances from the FHLB and other borrowings:
Fixed rate ranging from 1.50% to 3.86%	$	845,000	$	886,000
Floating rate based on 3-month LIBOR ranging from 2.32% to 2.63% (December 31, 2018 - 2.40% to 2.82%) (1)	280,000		280,000
Fixed rate ranging from 0.62% to 2.42% (December 31, 2019 - 0.71% to 3.23%) (1)					$	1,050,000	$	1,085,000
Floating rate three-month LIBOR ranging from 1.84% to 2.03%					—		150,000
	$	1,125,000	$	1,166,000	$	1,050,000	$	1,235,000

__________________

(1)

AtAs of June 30, 2020 and December 31, ~~2018, we had designated certain~~2019, includes $530 million (fixed interest rate ~~swaps as cash flow hedges~~raging from 0.62% to ~~manage this variable interest rate exposure. In March 2019,~~0.97%) in advances from the ~~Company terminated these interest rate swap contracts. As a result, the Company received cash equal~~FHLB that are callable prior to the contracts’ fair value at the date of termination of approximately $8.9 million which is recorded in AOCI. This amount will be amortized over the original remaining lives of the contracts as an offset to interest expense on the Company’s FHLB advances. The Company recorded a credit of approximately $0.5 million against interest expense on FHLB advances in the first half of 2019 and expects to record a credit of approximately $0.7 million in the rest of 2019.maturity.

At December 31, 2018, we had designated certain interest rate swaps as cash flow hedges to manage this variable interest rate exposure. In the first quarter of 2019, the Company terminated these interest rate swap contracts. As a result, the Company received cash equal to the contracts’ fair value at the date of termination of approximately $8.9 million which is recorded in AOCI. This amount is being amortized over the original remaining lives of the contracts as an offset to interest expense on the Company’s FHLB advances. The Company recorded a credit of approximately $0.7 million against interest expense on FHLB advances in the first half of 2020 ($0.5 million in the first half of 2019) and expects to record a credit of approximately $0.7 million in the rest of 2020.

In early April 2020, the Company restructured $420.0 million of its fixed-rate FHLB advances extending their original maturities from 2021 to 2023 at lower interest rates. The Company incurred a loss of $17.0 million as a result of the restructuring which was blended into the new interest rates of these advances, affecting the yields through their remaining maturities. The Company accounted for these transactions as the modification of existing debt in accordance with U.S. GAAP.

At June 30, ~~2019,~~2020, advances from the FHLB had maturities through ~~2023~~2030 with interest rates ranging from ~~1.50%~~0.62% to ~~3.86%~~2.42%.

~~We also maintain federal funds lines with several banks, and had $72.0 million and $35.5 million of availability under these lines at June 30, 2019 and December 31, 2018, respectively.~~ We expect to continue taking FHLB funding, as needed, in short duration maturities.

We also maintain federal funds lines with several banks, and had $65.0 million of availability under these lines at June 30, 2020 and December 31, 2019.

On June 23, 2020, the Company completed a $60.0 million offering of Senior Notes with a coupon rate of 5.75% and due 2025. The net proceeds, after direct issuance costs of $1.6 million, totaled $58.4 million. The Senior Notes are presented net of direct issuance costs in the consolidated financial statements. These costs are deferred and amortized over 5 years. The Senior Notes, which are fully and unconditionally guaranteed by the Company’s wholly-owned subsidiary, Amerant Florida Bancorp Inc., or Amerant Florida, provided the Company with a new source of funding as we continue to navigate the COVID-19 pandemic.

We and our subsidiary Amerant Florida are ~~a corporation~~corporations separate and apart from the Bank and, therefore, must provide for our own liquidity. Our main source of funding is dividends declared and paid to us and Amerant Florida by the Bank. ~~Additionally, our~~The Company, which is the issuer of the Senior Notes, held cash and cash equivalents of $99.5 million as of June 30, 2020, in funds available to service its Senior Notes, as a separate stand-alone entity. Our subsidiary ~~Amerant Florida Bancorp Inc., formerly Mercantil Florida Bancorp Inc., or~~ Amerant Florida, which is an intermediate bank holding company, ~~and~~ the obligor on our junior subordinated debt and the guarantor of the Senior Notes, held cash and cash equivalents of ~~$43.4~~$19.1 million as of June 30, ~~2019~~2020 and ~~$32.9~~$48.9 million as of December 31, ~~2018~~2019, respectively, in funds available to service ~~this~~its junior subordinated ~~debt. Of this~~debt, as a separate stand-alone entity. In the first quarter of 2020, we used $27.1 million of Amerant Florida’s cash ~~$25.5 million will be used~~ to redeem the outstanding trust preferred securities issued by its Statutory Trust ~~II and its Capital Trust III subsidiary,~~I and the related junior subordinated debt issued by Amerant Florida.

~~On July 10, 2019~~We have not provided summarized financial information for the Company ~~announced~~and Amerant Florida as we do not believe it would be material information since the ~~redemption~~assets, liabilities and results of operations of the Company and Amerant Florida are not materially different from the amounts reflected in the consolidated financial statements of the Company.

COVID-19 Pandemic

Our deposits and wholesale funding operations, including advances from the FHLB, Senior Notes and other short-term borrowings, have historically supplied us with a significant source of liquidity. These sources have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our business. We evaluate our funding requirements on a regular basis to cover any potential shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity when necessary. There is some uncertainty surrounding the potential impact of the COVID-19 outbreak on our results of operations and cash flows. As a result, we are proactively taking steps to increase cash available on-hand, including, but not limited to, the repositioning of our investment portfolio, and seeking to extend the duration of and reduce the cost on, our long-term debt, primarily advances from the FHLB. Cash and cash equivalents increased $96.0 million or 79.1% in the six months ended June 30, 2020 attributable to higher balances at the Federal Reserve and include the net proceeds of $58.4 million from the issuance of Senior Notes completed during the three months ended June 30, 2020. This increase in Cash and cash equivalents includes proceeds from the aforementioned issuance of Senior Notes. See —Cash and Cash Equivalents. In addition, in early April 2020, the Company modified maturities on $420.0 million fixed-rate FHLB advances. See earlier discussion in this section.

Redemption of Junior Subordinated Debentures

On January 30, 2020, the Company redeemed all ~~$15.0~~$26.8 million of its outstanding ~~10.60%~~8.90% trust preferred capital securities issued by ~~its Statutory Trust II subsidiary, and all $10.0 million of its outstanding 10.18% trust preferred securities issued by its~~ Capital Trust ~~III subsidiary. The Capital Trust III securities were redeemed on July 31, 2019~~I at ~~the contractual call~~a redemption price of ~~101.018% and the Statutory Trust II securities will be redeemed on September 7, 2019, the earliest call date, at the contractual call price of 100.530%~~100%. The Company ~~will~~ simultaneously ~~redeem~~redeemed all ~~$15.5 million and $10.4 million~~ junior subordinated debentures held by ~~its Statutory Trust II and~~ Capital Trust ~~III, respectively,~~I as part of ~~these~~this redemption ~~transactions. These redemptions together will reduce~~transaction. This redemption reduced total cash and cash equivalents by ~~approximately $23.8~~$27.1 million, financial liabilities by ~~approximately $25.9~~$28.1 million, other assets by $3.4 million, and other ~~assets~~liabilities by ~~approximately $2.4 million.~~$2.2 million at that date. In addition, ~~third quarter 2019 results will include~~the Company recorded a ~~total~~ charge of $0.3 million during the first quarter of 2020 for the ~~premiums paid to security holders from these redemptions. The~~unamortized issuance costs. This redemption ~~of these legacy Tier 1 capital instruments will reduce~~reduced the Company’s Tier 1 equity capital at that date by a ~~total~~net of ~~$23.5~~$24.7 million and pretax annual interest expense by $2.4 million.

There are statutory and regulatory limitations that affect the ability of the Bank to pay dividends to the Company. These limitations exclude the effects of ~~AOCI/AOCL.~~AOCI. Management believes that these limitations will not affect the Company’s ability, and Amerant Florida’s ability, to meet their ongoing short-term cash obligations. See “Supervision and Regulation” in the Form ~~10-K.~~10-K for the year ended December 31, 2019.

Regulatory Capital Requirements

Our Company’s consolidated regulatory capital amounts and ratios are presented in the following table:


	Actual				Required for Capital Adequacy Purposes				Regulatory Minimums To be Well Capitalized				Actual				Required for Capital Adequacy Purposes				Regulatory Minimums To be Well Capitalized
(in thousands, except percentages)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2019
June 30, 2020
Total capital ratio	$	943,966	14.70	%	$	513,809	8.00	%	$	642,262	10.00	%	$	922,404	14.34	%	$	514,566	8.00	%	$	643,207	10.00	%
Tier 1 capital ratio	889,376		13.85	%	385,357		6.00	%	513,809		8.00	%	841,501		13.08	%	385,924		6.00	%	514,566		8.00	%
Tier 1 leverage ratio	889,376		11.32	%	314,358		4.00	%	392,947		5.00	%	841,501		10.39	%	323,865		4.00	%	404,831		5.00	%
Common Equity Tier 1	779,958		12.14	%	289,018		4.50	%	417,470		6.50	%
Common Equity Tier 1 (CET1)													780,373		12.13 %		289,443		4.50	%	418,085		6.50	%

December 31, 2018
December 31, 2019
Total capital ratio	$	916,663	13.54	%	$	541,638	8.00	%	$	677,047	10.00	%	$	945,310	14.78	%	$	511,760	8.00	%	$	639,699	10.00	%
Tier 1 capital ratio	859,031		12.69	%	406,228		6.00	%	541,638		8.00	%	891,913		13.94	%	383,820		6.00	%	511,760		8.00	%
Tier 1 leverage ratio	859,031		10.34	%	332,190		4.00	%	415,238		5.00	%	891,913		11.32	%	315,055		4.00	%	393,819		5.00	%
Common Equity Tier 1	749,465		11.07	%	304,671		4.50	%	440,080		6.50	%
Common Equity Tier 1 (CET1)													806,050		12.60	%	287,865		4.50	%	415,805		6.50	%

The Bank’s consolidated regulatory capital amounts and ratios are presented in the following table:


	Actual				Required for Capital Adequacy Purposes				Regulatory Minimums to be Well Capitalized				Actual				Required for Capital Adequacy Purposes				Regulatory Minimums to be Well Capitalized
(in thousands, except percentages)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2019
June 30, 2020
Total capital ratio	$	891,632	13.89	%	$	513,710	8.00	%	$	642,138	10.00	%	$	861,083	13.39	%	$	514,400	8.00	%	$	643,001	10.00	%
Tier 1 capital ratio	837,042		13.04	%	385,283		6.00	%	513,710		8.00	%	780,205		12.13	%	385,800		6.00	%	514,400		8.00	%
Tier 1 leverage ratio	837,042		10.66	%	314,024		4.00	%	392,530		5.00	%	780,205		9.64	%	323,680		4.00	%	404,600		5.00	%
Common Equity Tier 1	837,042		13.04	%	288,962		4.50	%	417,389		6.50	%
Common Equity Tier 1 (CET1)													780,205		12.13	%	289,350		4.50	%	417,950		6.50	%

December 31, 2018
December 31, 2019
Total capital ratio	$	883,746	13.05	%	$	541,564	8.00	%	$	676,955	10.00	%	$	841,305	13.15	%	$	511,638	8.00	%	$	639,547	10.00	%
Tier 1 capital ratio	826,114		12.20	%	406,173		6.00	%	541,564		8.00	%	787,908		12.32	%	383,728		6.00	%	511,638		8.00	%
Tier 1 leverage ratio	826,114		9.96	%	331,829		4.00	%	414,786		5.00	%	787,908		10.01	%	314,800		4.00	%	393,500		5.00	%
Common Equity Tier 1	826,114		12.20	%	304,630		4.50	%	440,021		6.50	%
Common Equity Tier 1 (CET1)													787,908		12.32	%	287,796		4.50	%	415,706		6.50	%

~~The Basel III Capital Rules revised~~In the definition of capital and describe the capital components and eligibility criteria for Common Equity Tier 1 capital, or “CET1”, additional Tier 1 capital and Tier 2 capital. Although trust preferred securities issued after May 19, 2010 generally do not qualify as Tier 1 capital, all outstanding series of our trust preferred securities totaling $114.1 million atsix months ended June 30 ~~2019, are grandfathered and continue to qualify as Tier 1 capital. On July 10, 2019~~2020, the Company ~~announced the redemption of~~redeemed all ~~$15.0~~$26.8 million of its outstanding ~~10.60%~~8.90% trust preferred capital securities issued by ~~its Statutory Trust II, and all $10.0 million of its outstanding 10.18% trust preferred securities issued by its~~ Capital Trust ~~III. When these instruments are redeemed, the Company’s regulatory capital ratios are expected to exceed regulatory minimums to be well-capitalized.~~ I. See “Capital Resources and Liquidity Management” for more detail on the redemption of trust preferred securities and related junior subordinated debt.

The Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (the “FDIC”, and collectively with the Federal Reserve and the OCC, the “Federal Banking Agencies”), published a final rule on July 22, 2019 that simplifies existing regulatory capital rules for non-advanced approaches institutions, such as the Company. ~~Specifically,~~Non-advanced approaches institutions will be permitted to implement the Capital Simplifications Final Rule as of its revised effective date in the quarter beginning January 1, 2020, or wait until the quarter beginning April 1, ~~2020,~~2020. As of the date of implementation, the required deductions from regulatory capital CET1 elements for mortgage servicing assets (“MSAs”) and temporary difference deferred tax assets (“DTAs”) are only required to the extent these assets exceed 25% of CET1 capital elements, less any adjustments and deductions (the “CET1 Deduction Threshold”). MSAs and temporary difference DTAs that are not deducted from capital are assigned a 250% risk weight. Investments in the capital instruments of unconsolidated financial institutions are deducted from capital when these exceed the 25% CET1 Deduction Threshold. Minority interests in up to 10% of the parent banking organization’s CET1, Tier capital and total capital, after deductions and adjustments are permitted to be included in capital effective October 1, 2019. Also effective October 1, 2019, the final rule ~~makes~~made various technical amendments, including reconciling a difference in the capital rules and the bank holding company rules that permits the redemption of bank holding company common stock without prior Federal Reserve approval under the capital rules. Such redemptions remain subject to other requirements, including the Bank Holding Company Act and Federal Reserve Regulation Y. The Company ~~currently estimates~~adopted these simplified capital rules ~~should have~~during the first quarter of 2020 and had no material effect on the Company’s regulatory capital and ~~ratios when effective.~~

ratios.

The Federal Banking Agencies issued ~~in February~~final rules on October 29, 2019 ~~a notice of proposed rulemaking~~ that ~~would~~ provide simplified capital measures, including a simplified measure of capital adequacy for qualifying community banking organizations consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Growth Act”). Qualifying community banking organizations with less than $10 billion of assets that comply with, and elect to use, the community bank leverage ratio (“CBLR”) ~~framework~~ and that maintain a CBLR greater than 9% would be considered to be “well-capitalized” and would no longer be subject to the other generally applicable capital rules. The CBLR would be used and applied for purposes of compliance with the Federal Banking Agencies’ prompt corrective action rules, and Federal Reserve Regulation O and W compliance, as well as in calculating FDIC deposit insurance assessments. ~~These new rules, and the proposed~~The CBLR, among other proposals, ~~reflect~~reflects the Federal ~~Banking Agencies’~~banking agencies’ focus on appropriately tailoring capital requirements to an institution’s size, complexity and risk profile. The CBLR will first be available for banking organizations to use in their March 31, 2020 Call Report or Form FR Y-9C. Non-advanced approaches banking organizations will also be able to take advantage of simpler regulatory capital requirements for mortgage servicing assets, certain deferred tax assets arising from temporary differences and investments in unconsolidated financial institutions. As of March 31, 2020, the Company determined to opt out of adopting the new “community bank leverage ratio” given that the perceived benefits provided by the new regulation did not exceed the potential costs considering the Company’s current and projected size and operations.

Off-Balance Sheet Arrangements

The following table shows the outstanding balance of our off-balance sheet arrangements as of the end of the periods presented. Except as disclosed below, we are not involved in any other off-balance sheet contractual relationships that are reasonably likely to have a current or future material effect on our financial condition, a change in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. For more details on the Company’s off-balance sheet arrangements, see Note 16 to our audited consolidated financial statements included in the Form ~~10-K.~~10-K for the year ended December 31, 2019.


(in thousands)	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Commitments to extend credit	$	844,170	$	923,424	$	786,034	$	820,380
Credit card facilities (1)	143,666		198,500
Letters of credit	30,564		27,232		15,696		17,414
	$	1,018,400	$	1,149,156	$	801,730	$	837,794

~~__________________~~


~~(1)~~	In April 2019, we revised our credit card program to further strengthen credit quality. The Company stopped the charging privileges to our smallest and riskiest cardholders and required repayment of their balances by November 2019. Other cardholders’ charging privileges will end in October 2019 and they will be required to repay all balances by January 2020.

Contractual Obligations

In the normal course of business, we and our subsidiaries enter into various contractual obligations that may require future cash payments. Significant commitments for future cash obligations include capital expenditures related to operating leases, and other borrowing arrangements. Set forth below are material changes to our existing contractual obligations previously disclosed in the Form 10-K. Other than the changes shown below, there have been no material changes to the contractual obligations previously disclosed in the Form 10-K

FHLB Advances Restructuring

In early April 2020, the Company restructured $420.0 million of its fixed-rate FHLB advances extending their original maturities from 2021 to 2023 at lower interest rates. The Company incurred a loss of $17.0 million as a result of the restructuring which was blended into the new interest rates of these advances, affecting the yields through their remaining maturities. The Company accounted for these transactions as the modification of existing debt in accordance with U.S. GAAP.

Senior Notes Issuance

On June 23, 2020, the Company completed a $60.0 million offering of Senior Notes with a coupon rate of 5.75% and due 2025. The net proceeds, after direct issuance costs of $1.6 million, totaled $58.4 million. The Senior Notes are presented net of direct issuance costs in the consolidated financial statements. These costs will be deferred and amortized over 5 years. The Senior Notes, which are fully and unconditionally guaranteed by the Company’s wholly-owned subsidiary, Amerant Florida, provided the Company with a new source of funding as we continue to navigate the COVID-19 pandemic.

Critical Accounting Policies and Estimates

For our critical accounting policies and estimates disclosure, see the Form 10-K where such matters are disclosed for the Company’s latest fiscal year ended December 31, ~~2018.~~2019.

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. We evaluate our estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Accounting policies, as described in detail in the notes to our consolidated financial statements, are an integral part of those consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. We believe that the critical accounting policies and estimates discussed below require us to make difficult, subjective or complex judgments about matters that are inherently uncertain. Changes in these estimates, that are likely to occur from period to period, or using different estimates that we could have reasonably used in the current period, would have a material impact on our financial position, results of operations or liquidity.

The COVID-19 pandemic has severely restricted the level of economic activity in the U.S. and around the world since March 2020. Several states and cities across the U.S., including the States of Florida, New York and Texas and cities where the Company has banking centers, LPOs and where the Company’s principal place of business is located, have also implemented quarantines, restrictions on travel, “shelter at home” orders, and restrictions on types of business that may continue to operate. While some of these measures and restrictions have been lifted and certain businesses have reopened in the second quarter 2020, the Company cannot predict when restrictions currently in place may be lifted, or whether restrictions that have been lifted will need to be imposed or tightened in the future if viewed as necessary due to public health concerns. Given the uncertainty regarding the spread and severity of COVID-19 and its adverse effects on the U.S. and global economies, the extent to which the COVID-19 pandemic may impact the Company’s financial condition or results of operations is uncertain and cannot be accurately predicted at this time.

The three and six months ended June 30, 2020 were characterized by heightened uncertainty due to the COVID-19 pandemic, which could impact estimates and assumptions made by management, especially with respect to the adequacy of the Company’s allowance for loan losses and the Company’s evaluation of goodwill for impairment.

Allowance for Loan Losses. The allowance for loan losses represents an estimate of the current amount of principal that we will be unlikely to collect given facts and circumstances as of the evaluation date, and includes amounts arising from loans individually and collectively evaluated for impairment. Loan losses are charged against the allowance when we believe the un-collectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. We estimate the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors to ensure the current allowance balance is maintained at a reasonable level to provide for recognized and unrecognized but inherent losses in the loan portfolio. Allocations of the allowance are made for loans considered to be individually impaired, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Amounts are charged-off when available information confirms that specific loans or portions thereof, are uncollectible. This methodology for determining charge-offs is applied consistently to each segment.

We determine a separate allowance for losses for each loan portfolio segment. The allowance for loan losses consists of specific and general reserves. Specific reserves relate to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered in determining impairment include payment status, collateral value and the probability of collecting all amounts when due. Measurement of impairment is based on the excess of the carrying value of the loan over the present value of expected future cash flows at the measurement date, or the fair value of the collateral in the case where the loan is considered collateral-dependent. We select the measurement method on a loan-by-loan basis except that collateral-dependent loans for which foreclosure is probable are measured at the fair value of the collateral.

We recognize interest income on impaired loans based on our existing method of recognizing interest income on nonaccrual loans. Loans, generally classified as impaired loans, for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered TDRs with measurement of impairment as described above.

If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s effective interest rate or at the fair value of collateral if repayment is expected solely from the collateral.

General reserves cover non-individually-impaired loans and are based on historical loss rates for each loan portfolio segment, adjusted for the effects of qualitative factors that in management’s opinion are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management and other relevant staff; changes in the volume and severity of past due balances, nonaccrual and other adversely graded loans; changes in the loan review system; changes in the value of the underlying collateral for collateral-dependent loans; concentrations of credit and the effect of other external factors such as competition and legal and regulatory requirements, and beginning in the six month period ended June 30, 2020, the probable deterioration in the loan portfolio as a result of the COVID-19 pandemic.

Concentrations of credit risk can affect the level of the allowance and may involve loans to one borrower, borrowers engaged in or dependent upon the same industry, or a group of borrowers whose loans are predicated on the same type of collateral. We are also subject to a geographic concentration of credit because we primarily operate in South Florida, the greater Houston, Texas area and the New York City area. In addition, during the three and six months ended June 30, 2020, the evaluation of credit risk concentrations on our loan portfolio is subject to current economic conditions associated with the COVID-19 pandemic, especially on loans to borrowers in certain industries identified as being more sensitive to the negative impact of deteriorating economic conditions such as restaurants and hotels.

Our estimate for the allowance for loan losses is sensitive to the loss rates from our loan portfolio segments, and to our evaluation of uncertainties associated with current economic conditions derived from the COVID-19 pandemic. We believe the risk ratings, loss severities currently in use, and our evaluation of the uncertainties associated with current economic conditions derived from the COVID-19 pandemic are appropriate. The process of determining the level of the allowance for credit losses requires a high degree of judgment. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions.

Goodwill. Goodwill is evaluated for impairment at least annually and on an interim basis if an event or circumstance indicates that it is likely an impairment has occurred. Based on this evaluation, we concluded goodwill was not considered impaired as of December 31, 2019.

During the second quarter of 2020, the Company assessed the indicators of goodwill impairment and noted certain events that indicated it was more likely than not that there was potential for goodwill impairment and, therefore, concluded an interim test of impairment was required. Triggering events associated with the COVID-19 pandemic included continued disruption to economic activity in the markets we serve, a reported net loss driven primarily by higher estimated provision for loan losses and a lower interest rate environment which has negatively affected our net interest margin. As a result of these conditions, the Company performed a quantitative assessment of goodwill impairment as of June 30, 2020, which included determining the estimated fair value of the reporting unit and comparing that fair value to the reporting unit's carrying amount. The results of the test indicated that the estimated fair value of the reporting unit exceeded its carrying amount at June 30, 2020. Based on this evaluation, we concluded goodwill was not impaired as of June 30, 2020.

We have applied significant judgment for interim and annual goodwill impairment testing purposes. Our Market Risk and Budget and Profitability units provide significant support for the development of judgments and assumptions used for these evaluations. Future negative changes may result in potential impairments of goodwill in future periods.

Determining the fair value of the reporting unit for goodwill impairment testing is considered a critical accounting estimate because it requires significant management judgment and the use of subjective measurements. Variability in the market and changes in assumptions or subjective measurements used to determine fair value are reasonably possible and may have a material impact on our financial position, liquidity or results of operations.

Recently Issued Accounting Pronouncements. There are no recently issued accounting pronouncements that have recently been adopted by us.

For a description of accounting standards issued that are pending adoption, see Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” in the Company’s interim consolidated financial statements in this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe interest rate and price risks are the most significant market risks impacting us. We monitor and evaluate these risks using sensitivity analyses to measure the effects on earnings, equity and the debt securities available for sale portfolio mark-to-market exposure, of changes in market interest ~~rates on earnings, equity and the available for sale portfolio mark-to-market exposure.~~rates. Exposures are managed to a set of limits previously approved by our board of directors and monitored by management.

Our market risk is measured and monitored by the Asset and Liability function, carried out by our Treasury Department and monitored by the Asset/Liability Committee, or ALCO, and the Market Risk ~~Management unit which reports to our Chief Risk Officer.~~and Analytics unit. The unit’s primary responsibilities are identifying, measuring, monitoring and controlling interest rate and liquidity risks and balance sheet asset/liability management (“ALM”). It also assesses and monitors the price risk of the ~~Bank’s~~Company’s investment activities, which represents the risk to earnings and capital arising from changes in the fair market value of our investment ~~portfolio.~~portfolio, are monitored by ALCO using, among other tools, comparisons of actual performance versus approved limits maintained and regularly reviewed by the Asset and Liability function.

~~Among its duties, the~~The Market Risk and Analytics unit is in charge of the independent validation of the Asset/Liability Management model. This unit ~~performs~~also is in charge of reporting to the ~~following functions:~~

~~maintains a comprehensive market risk~~Board on our compliance with approved limits, and ~~ALM framework;~~

~~measures and monitors market risk and ALM across the organization~~proposing changes to ~~ensure that they are within~~limits in line with approved risk ~~limits and reports to the Bank’s asset-liability committee (“ALCO”) and to the board of directors; and~~

~~recommends changes to risk limits to the board of directors.~~appetite.

We manage and implement our ALM strategies through monthly ALCO meetings. The Chief Business Officer participates in the ALCO meetings. In the ALCO, ~~the Bank discusses, analyzes~~we discuss, analyze, and ~~decides~~decide on the best course of action to implement strategies designed as part of the ALM process.

Market risks taken by the ~~Bank~~Company are managed by using ~~the~~an appropriate mix of marketable securities, wholesale funding and ~~derivatives~~derivative contracts.

Market Risk Measurement

ALM

We use sensitivity analyses as the primary tool to monitor and evaluate market risk, which is comprised of interest rate risk and price risk. Exposures are managed to a set of limits previously approved by our board of directors and monitored by ALCO.

Sensitivity analyses are based on changes in interest rates (both parallel yield curve changes as well as non-parallel), and are performed for several different ~~metrics, and~~metrics. They include three types of analyses consistent with industry practices:

•earnings sensitivity;

•economic value of equity, or EVE; and

•investment portfolio mark-to-market exposure ~~(both~~(debt and equity securities available for sale and held to ~~maturity)~~maturity securities).

The Company continues to be asset sensitive, therefore income is expected to increase when interest rates move higher, and to decrease when interest rates ~~decline.~~move lower.

The high duration of our balance sheet has led to more sensitivity in the market values of financial instruments (assets and liabilities, including off balance sheet exposures). This sensitivity is captured in the EVE and investment portfolio mark-to-market exposure analyses. In the earnings sensitivity analysis, the opposite occurs. The higher duration will produce higher income today and less income variability during the next 12 months.

We monitor these exposures, and contrast them against limits established by our board of directors. Those limits correspond to the capital levels and the capital leverage ratio that we would report taking into consideration the interest rate increase scenarios modeled. Although we model the market price risk of the available for sale securities portfolio, and its projected effects on AOCI or AOCL (a component of stockholders’ equity), the Bank and the Company made an irrevocable election in 2015 to exclude the effects of AOCI or AOCL in the calculation of ~~their~~its regulatory capital ratios, in connection with the ~~Federal Banking Agencies~~ adoption of Basel III Capital Rules in the U.S.

Earnings Sensitivity

In this method, the financial instruments (assets, liabilities, on and off-balance sheet positions) generate interest rate risk exposure from mismatches in maturity and/or repricing given the financial instruments’ characteristics or cash flow behaviors such as pre-payment ~~speed.~~speeds. This method measures the potential change in our net interest income over the next 12 months, which ~~illustrates~~corresponds to our short term interest rate risk. This analysis subjects a static balance sheet to instantaneous and parallel interest rate shocks to the yield curves for the various ~~interests~~interest rates and indices that affect our net interest income. We compare on a monthly basis the effect of the analysis on our net interest income over a one-year period against limits established by our board of directors.

The following table shows the sensitivity of our net interest income as a function of modeled interest rate changes:


	Change in earnings (1)										Change in earnings⁽¹⁾
(in thousands, except percentages)	June 30, 2019					December 31, 2018					June 30, 2020					December 31, 2019
Change in Interest Rates (Basis points)
Increase of 200	$	24,021		10.9	%	$	30,993		12.8	%	$	19,823		11.1	%	$	14,237		6.9	%
Increase of 100	14,991			6.8	%	18,702			7.7	%	12,446			7.0	%	10,091			4.9	%
Decrease of 25	(4,271		)	(1.9	)%	(5,554		)	(2.3	)%	(3,368		)	(1.9	)%	(4,856		)	(2.3	)%
Decrease of 100	(18,016		)	(8.2	)%	(22,789		)	(9.4	)%	—			—	%	(20,739		)	(10.0	)%

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(1) Represents the change in net interest income, and the percentage that change represents of the base scenario net interest income. The base scenario assumes (i) flat interest rates over the next 12 months, (ii) that total financial instrument balances are kept constant over time and (iii) that interest rate shocks are instant and parallel to the yield curve, for the various interest rates and indices that affect our net interest income.

Net interest income in the base scenario, decreased to approximately ~~$220.0~~$178.0 million in June 30, ~~2019~~2020 compared to ~~$242.0~~$207.0 million in December 31, ~~2018,~~2019. This decrease is mainly due to a lower market interest rate environment driven by the emergency rate cuts implemented by the Federal Reserve during March 2020 and ~~secondarily to a smaller balance sheet. The Bank~~the global pandemic.The Company continues to be asset sensitive, however given more recent market interest rate expectations, management has been taking steps to reduce interest rate sensitivity.

The Company periodically reviews the scenarios used for earnings sensitivity to reflect market conditions.

Economic Value of Equity Analysis

We use EVE to measure the potential change in the fair value of the Company’s asset and liability positions, and the subsequent potential effects on our economic capital. In the EVE analysis, we calculate the fair value of all assets and liabilities, including off-balance sheet instruments, based on different rate environments (i.e. fair value at current rates against the fair value based on parallel shifts of the yield curves for the various interest rates and indices that affect our net interest income). This analysis measures the long term interest rate risk of the balance sheet.

The following table shows the sensitivity of our EVE as a function of interest rate changes as of the periods presented:


	Change in equity (1)				Change in equity ⁽¹⁾
	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Change in Interest Rates (Basis points)
Increase of 200	(6.58	)%	(4.94	)%	(2.10	)%	(11.10	)%
Increase of 100	(1.59	)%	(1.21	)%	1.3	%	(3.86	)%
Decrease of 25	(0.19	)%	(0.28	)%	(0.80	)%	0.24	%
Decrease of 100(2)	(1.87	)%	(1.86	)%	—	%	(0.11	)%

~~_______________~~__________________

(1) Represents the percentage of equity change in a static balance sheet analysis assuming interest rate shocks are instant and parallel to the yield curves for the various interest rates and indices that affect our net interest income.

(2) We have discontinued the decrease of 100 basis point shock scenario at June 30, 2020 due to the unlikely scenario at the current low interest rate environment.

The larger negative effects to EVE as of June 30, ~~2019, when compared to December 31, 2018,~~2020 for the 200 and 100 basis point increase ~~scenarios,~~ are ~~principally~~mainly attributed to ~~our~~the lower average duration of the investment portfolio, higher average duration of FHLB advances, and ~~our termination~~the unwinding in 2019 of the interest rate swaps ~~during the first quarter.~~we had designated as cash flow hedges. During the periods reported, the modeled effects on the EVE remained within established Company risk limits.

Available for Sale ~~Securities~~ Portfolio mark-to-market exposure

The ~~Bank~~Company measures the potential change in the market price of its investment portfolio, and the resulting potential change on ~~our~~its equity for different interest rate scenarios. This table shows the result of this test as of June 30, ~~2019~~2020 and December 31, ~~2018:~~

2019:


	Change in market value(1)						Change in market value ⁽¹⁾
(in thousands)	June 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Change in Interest Rates
(Basis points)
Increase of 200	$	(117,852	)	$	(92,213	)	$	(100,107	)	$	(148,369	)
Increase of 100	(54,847		)	(44,780		)	(42,789		)	(69,956		)
Decrease of 25	10,994			9,831			9,547			14,008
Decrease of 100	41,142			35,916			—			53,946

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(1) Represents the amounts by which the investment portfolio mark-to-market would change assuming rate shocks that are instant and parallel to the yield curves for the various interest rates and indices that affect our net interest income.

The average duration of our investment portfolio decreased to ~~3.1~~2.6 years at June 30, ~~2019~~2020 compared to ~~3.4~~3.8 years at December 31, ~~2018.~~2019. The lower duration was primarily the result of the ~~sale~~strategic purchase of ~~$91.2 million of municipal bonds~~20-year U.S. Treasuries and ~~increased projected~~CMOs with prepayment ~~speeds in~~protection. Additionally, the ~~mortgage backed securities~~floating rate portfolio ~~due~~declined to ~~lower rates. Even though the investment duration is lower~~14.3% at ~~June 30, 2019, there is a higher exposure to interest rate changes when compared to~~ December 31, ~~2018, as a result of our termination of interest rate swaps during first quarter of 2019.~~2019 from 23.4% at December 31, 2018.

We monitor our interest rate exposures monthly through the ALCO, and seek to manage these ~~mark-to-market~~ exposures within limits established by our board of directors. Those limits correspond to the capital ratios that we would report taking into consideration the interest increase scenarios modeled. Notwithstanding that our model includes the available for sale securities portfolio, and its projected effect on AOCI or AOCL (a component of shareholders’ equity), we made an irrevocable election in 2015 to exclude the effects of AOCI or AOCL in the calculation of our regulatory capital ratios, in connection with the adoption of Basel III capital rules in the U.S.

Limits Approval Process

The ALCO is responsible for the management of market risk exposures and meets monthly. The ALCO monitors all the ~~Bank’s~~Company’s exposures, compares them against specific limits, and takes actions to modify any exposure that the ALCO considers inappropriate based on market expectations or new business strategies, among other factors. The ALCO reviews and recommends market risk limits to our board of directors. These limits are reviewed annually or as more frequently as believed appropriate, based on various factors, including capital levels and earnings. ~~The Market Risk Management unit supports the ALCO in the monitoring of market risk exposures and balance sheet management.~~

The following table sets forth information regarding our interest rate sensitivity due to the maturities of our interest bearing assets and liabilities as of June 30, ~~2019 and December 31, 2018.~~2020. This information may not be indicative of our interest rate sensitivity position at other points in time. In addition, ALM considers the distribution of amounts indicated in the table, including the maturity date of fixed-rate instruments, the repricing frequency of variable-rate financial assets and liabilities, and anticipated prepayments on amortizing financial instruments.


	June 30, 2019																June 30, 2020
(in thousands except percentages)	Total		Less than one year			One to three years			Four to Five Years			More than five years			Non-rate		Total		Less than one year			One to three years			Four to Five Years			More than five years			Non-rate
Earning Assets
Cash and cash equivalents	$	90,317	$	64,504		$	—		$	—		$	—		$	25,813	$	217,349	$	181,698		$	—		$	—		$	—		$	35,651
Securities:
Available for sale	1,501,222		389,561			339,625			248,158			499,609			24,269
Held to maturity	81,240		—			—			—			81,240			—
Federal Reserve Bank and FHLB stock	68,170		55,115			—			—			—			13,055
Debt available for sale																	1,519,784		483,115			386,547			246,168			403,954			—
Debt held to maturity																	65,616		—			—			—			65,616			—
Equity securities with readily determinable fair value not held for trading																	24,425		—			—			—			—			24,425
Federal Reserve and FHLB stock																	64,986		51,803			—			—			—			13,183
Loans portfolio-performing (1)	5,780,005		3,802,118			1,041,217			612,415			324,255			—		5,795,011		3,849,275			1,085,277			563,490			296,969			—
Earning Assets	$	7,520,954	$	4,311,298		$	1,380,842		$	860,573		$	905,104		$	63,137	$	7,687,171	$	4,565,891		$	1,471,824		$	809,658		$	766,539		$	73,259
Liabilities
Interest bearing demand deposits	$	1,183,051	$	1,183,051		$	—		$	—		$	—		$	—	$	1,186,613	$	1,186,613		$	—		$	—		$	—		$	—
Saving and money market	1,510,832		1,510,832			—			—			—			—		1,447,661		1,447,661			—			—			—			—
Time deposits	2,339,771		1,503,658			507,194			312,906			16,013			—		2,434,077		1,674,900			618,415			126,041			14,721			—
FHLB advances and other borrowings	1,125,000		600,000			385,000			140,000			—			—
FHLB advances																	1,050,000		530,000			120,000			260,000			140,000			—
Senior Notes																	58,419		—			—			58,419			—			—
Junior subordinated debentures	118,110		64,178			—			—			53,932			—		64,178		64,178			—			—			—			—
Interest bearing liabilities	$	6,276,764	$	4,861,719		$	892,194		$	452,906		$	69,945		—		$	6,240,948	$	4,903,352		$	738,415		$	444,460		$	154,721		$	—
Interest rate sensitivity gap			(550,421		)	488,648			407,667			835,159			63,137				(337,461		)	733,409			365,198			611,818			73,259
Cumulative interest rate sensitivity gap			(550,421		)	(61,773		)	345,894			1,181,053			1,244,190				(337,461		)	395,948			761,146			1,372,964			1,446,223
Earnings assets to interest bearing liabilities (%)			88.7		%	154.8		%	190.0		%	1,294.0		%	N/M				93.1		%	199.3		%	182.2		%	495.4		%	N/M

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(1)	“Loan portfolio-performing” excludes ~~$32.8~~$77.3 million of non-performing loans.


N/M	Not meaningful

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company ~~with the participation~~maintains a set of ~~its management, including its Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of its~~ disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are

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effective as of the end of the period covered by this quarterly report on Form ~~10-Q. Based upon~~10-Q to ensure that ~~evaluation~~information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and asreported within the time periods specified in the rules and forms of the ~~end of the period covered by this Form 10-Q, the Company’s~~SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, ~~concluded that the Company’s disclosure controls and procedures were effective~~as appropriate, to allow timely decisions regarding ~~disclosure in its reports that the Company files or submits to the SEC under the Exchange Act.~~

required disclosures.

Changes in Internal Control Over Financial Reporting

There ~~have been~~were no changes in ~~the Company’s~~our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Form 10-Q that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

~~Any control system,~~Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well ~~conceived~~designed and operated, can provide only reasonable, not absolute, assurance ~~that its objectives are achieved. The~~of achieving the desired control objectives. In addition, the design of ~~a control system inherently has limitations, including~~disclosure controls and procedures must reflect the ~~controls’ cost~~fact that there are resource constrains and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their ~~benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.~~costs.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, in the ordinary course, engaged in litigation, and we have a small number of unresolved claims pending, including the one described in more detail below. In addition, as part of the ordinary course of business, we are parties to litigation involving claims to the ownership of funds in particular accounts, the collection of delinquent accounts, credit relationships, challenges to security interests in collateral and foreclosure interests, that are incidental to our regular business activities. While the ultimate liability with respect to these other litigation matters and claims cannot be determined at this time, we believe that potential liabilities relating to pending matters are not likely to be material to our financial position, results of operations or cash flows. Where appropriate, reserves for these various matters of litigation are established, under FASB ASC Topic 450, Contingencies, based in part upon management’s judgment and the advice of legal counsel.

A lawsuit was filed in September 2017 in Miami-Dade County Circuit Court, Florida and has been amended multiple times. The claims are against Amerant Trust and Kunde Management, LLC (“Kunde”). Kunde was established as a Managing Partner of Kunde, CV to manage ~~trusts~~Kunde, CV for the respective benefit of ~~Gustavo~~the eight siblings of the Marturet Machado’s ~~wife and his siblings. Amerant Trust is the trustee of these trusts and is Kunde’s manager.~~family. The plaintiff is a beneficiary of ~~one trust established~~Kunde and is an aunt of Gustavo ~~Antonio~~ Marturet ~~Sr.,~~Medina, a Company director, and a sister-in-law of Mr. Gustavo ~~Antonio~~ Marturet ~~Sr.’s~~Medina’s mother, a principal Company shareholder.

~~This~~As previously disclosed, this action ~~alleges~~included allegations of breaches of contract, fiduciary duty, accounting and unjust enrichment, and mismanagement of ~~Kunde~~Kunde. The parties entered into a confidential settlement agreement and ~~seeks damages in~~the court entered an ~~unspecified amount.~~agreed order of dismissal with prejudice on July 6, 2020. The Company denies the claims, and believes these are barred by the statute of limitations and is defending this lawsuit vigorously. The parties began mediation on January 22, 2019, pursuant to court order, and settlement discussions through the mediator are ongoing. The Company cannot reasonably estimate at this time the possible loss or range of losses, if any, that may arise from this unresolved lawsuit and the timing of any resolution of this action. The Company has incurred approximately ~~$502,885~~$1.1 million in legal fees through ~~July~~June 30, ~~2019 defending~~2020 litigating this case. The Company expects to be partially reimbursed for these ~~fees in accordance with the trust agreements and the Kunde organizational documents upon conclusion of this proceeding.~~

At least quarterly, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. For those matters where it is probable that we will incur a loss and the amountfees. The terms of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments based on our quarterly reviews. For other matters, where a loss is not probable or the amount of the loss is not estimable, we have not accrued legal reserves, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings willsettlement agreement did not have a material ~~adverse effect~~impact on ~~our consolidated~~the Company's financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular mattercondition or a combination of matters, if unfavorable, may be material to our financial position, results of operations or cash flows for a particular period, depending upon the size of the loss or our income for that particular period.operating results.

ITEM 1A. RISK FACTORS

For detailed information about certain risk factors that could materially affect our business, financial condition or future results see ~~“Risk~~“Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2019. (the “Form 10-K”) and in Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the "First Quarter Form 10-Q"). Set forth below are material changes to our existing risk factors previously disclosed in the Form 10-K and in the First Quarter Form 10-Q and additional risk factors. Other than the risk factors set forth below, ~~addition,~~ there have been no material changes to the risk factors previously disclosed ~~under Part I, Item 1A, “Risk Factors”~~in the Form 10-K and the First Quarter Form 10-Q.

The COVID-19 pandemic has significantly impacted economic conditions globally and in the United States, has adversely impacted our business, financial condition and results of operations, and the ultimate impact on our business, financial condition and results of operations, will depend on future developments and other factors that are highly uncertain and will be impacted by the scope and duration of the ~~Company’s Form 10-K.~~pandemic and actions taken by governmental authorities in response.

An ~~additional risk includes~~outbreak of a novel strain of the Coronavirus, COVID-19, was first reported in December 2019 and has since spread globally, including to every state in the United States. The World Health Organization declared COVID-19 a pandemic on March 11, 2020, and subsequently, on March 13, 2020, the United States declared a national emergency with respect to COVID-19.

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The COVID-19 pandemic has had, and another pandemic in the future could have, a negative impact on the economy and financial markets, globally and in the United States. In many countries, including the United States, the COVID-19 pandemic has had a significant negative impact on economic activity and has contributed to significant volatility and negative pressure in financial markets. The outbreak has been rapidly evolving and, as cases of COVID-19 have continued to increase globally and in the United States, many countries, including the United States, have implemented and in certain cases reinstated measures aimed at containing the spread of COVID-19 including “shelter at home” orders, as well as mandating business and school closures and restricting travel.

Several states and cities across the United States, including the States of Florida, New York and Texas and cities where we have banking centers, LPOs and where our principal place of business is located, have also implemented quarantines, restrictions on travel, “shelter at home” orders, and restrictions on types of business that may continue to operate. While some of these measures and restrictions have been lifted, and certain businesses reopened, the Company cannot predict when restrictions currently in place may be lifted, or whether restrictions that have been lifted will need to be imposed or tightened in the future if viewed as necessary due to public health concerns. For example, the States of Florida and Texas have seen increases in the cases of COVID-19 during the second quarter and into the third quarter which may prompt state or local governments to reinstate certain measures and restrictions. As a result of the COVID-19 pandemic and the measures implemented to contain it, almost every industry has been and is being directly or indirectly impacted, including industries in which our customers operate. A number of our customers impacted by the COVID-19 pandemic have requested and been granted by the Company loan payment relief options, including interest-only and/or forbearance options. In addition, in the first quarter of 2020 and again in the second quarter of 2020, the Company significantly increased its provision for loan losses primarily due to estimated losses reflecting deterioration in the macro-economic environment as a result of the impact of the COVID-19 pandemic across multiple impacted sectors. The longer and more profound the impact of the COVID-19 pandemic has globally, in the United States and on our customers and their businesses, the more likely we will have to recognize loan losses or continue to increase the provision for loan losses. Also, due to the COVID-19 pandemic, the Company completed an assessment of goodwill for potential impairment on an interim basis as of June 30, 2020 and although it did not identify any impairment in the second quarter of 2020, there can be no assurance that prolonged market volatility resulting from the COVID-19 pandemic will not result in impairments to goodwill in future periods.

In addition, as a result of the COVID-19 pandemic and the need to implement social distancing and limit occupancy of businesses in the states and cities where we operate, the majority of our employees are currently working remotely. An extended period of remote work arrangements could introduce operational risks, including but not limited to cybersecurity risks, and limit our ability to provide services and products to our customers and, in general, manage our business.

Also, the COVID-19 pandemic, or a future pandemic, could have material adverse effects on our ability to successfully operate and on our financial condition, results of operations and cash flows due to, several factors including but not limited to the following:

~~Recent changes to~~the reduced economic activity may severely impact our ~~existing credit card program~~customers' businesses, financial condition and liquidity and may ~~affect our credit card losses and adversely affect certain credit card relationships.~~

~~Approximately 95%~~prevent one or more of our ~~credit card holders are foreign, mostly Venezuelan, and the card receivables were reflecting the stresses~~customers from meeting their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;

a decline in the ~~Venezuela economy. In April 2019, we revised~~credit quality of our ~~credit card program~~loan portfolio leading to ~~further strengthen credit quality. We stopped charge privileges~~a need to our smallest and riskiest cardholders and required repayment of their balances by November 2019. Other cardholders’ charge privileges will end in October 2019 and they will be required to repay all balances by January 2020. We reduced our credit card receivables from $31.2 million at March 31, 2019 to $26.1 million at June 30, 2019 and increasedincrease our allowance for loan ~~losses~~losses;

a decline in the credit quality of loans used as collateral to obtain advances from the Federal Home Loan Bank may trigger a request to replace the loans used as collateral with securities and may negatively impact our liquidity ratio;

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a significant decline in the value of the collateral used to secure loans that have a related interest rate swap agreement may limit our ability to realize enough value from the collateral to cover the outstanding balance of the loan and the related swap liability;

any impairment in value of our tangible and/or intangible assets which could be recorded as a result of weaker economic conditions;

the reduced economic activity could develop into a local and/or global economic recession, which could adversely affect the demand for our products and services;

increased unemployment and decreased consumer confidence, which could adversely affect account openings and result in decreased deposit activity and increased withdrawal activity;

the recent action of the Federal Reserve’s Federal Open Market Committee (‘‘FOMC’’) to lower the target federal funds rate, and any future action of the FOMC to lower the target federal funds rate further, may negatively affect our net interest income;

the potential volatility in the fair value and yields of our investment portfolio;

a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our ability to access the debt and/or equity markets in the future on ~~credit cards by $1.2 million to a total of $6.5 million.~~

~~We are making these changes to reduce and ultimately eliminate~~attractive terms, or at all, or negatively impact our credit ~~exposure~~ratings;

any reduction/impairment in value of the collateral used by our customers to secure their obligations with us that could be recorded as a result of weaker economic conditions; and ~~losses~~

the potential negative impact of a pandemic, including any preventative or protective actions that governments implement to contain it, or the occurrence of cases of COVID-19 at any of our banking centers or offices, may interfere with the ability of our employees and vendors to perform their respective responsibilities and obligations relative to the conduct of our business and, if a significant number of them are impacted, could result in a deterioration of our ability to ensure business continuity during a disruption.

The extent of the impact of COVID-19 over the Company and its customers will depend on ~~international cards. The discontinuance~~a number of ~~credit cards~~issues and future developments, which, at this time, are extremely uncertain and cannot be accurately predicted, including the scope, severity and duration of the pandemic, the actions taken to contain or mitigate the impact of the pandemic, and the ~~repayment terms~~direct and indirect effects that the pandemic and related containment measures may have, among others.

The COVID-19 pandemic presents material uncertainty and risk with respect to the financial condition, results of operations, cash flows and performance of the Company and the rapid development and fluidity of the situation surrounding the pandemic prevents any prediction as to its full adverse impact. Moreover, many risk factors described in our Annual Report on ~~outstanding balances~~Form 10-K for the year ended December 31, 2019 should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic.

As a participating lender in the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), the Company and the Bank are subject to additional risks of litigation from the Bank’s customers or other parties regarding the Bank’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, the President signed the CARES Act, which included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to several limitations and eligibility criteria. Since the inception of the PPP on April 2, 2020, the

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Bank began participating as a lender in the PPP; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company and the Bank to risks relating to noncompliance with the PPP. On or about April 16, 2020, the SBA notified lenders that the $349 billion earmarked for the PPP was exhausted. Congress has approved additional funding for the PPP and the President signed into law the Paycheck Protection Program and Health Care Enhancement Act on April 24, 2020.

Recently, several banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. The Company and the Bank may be exposed to the risk of similar litigation, both from customers and non-customers that approached the Bank regarding PPP loans, regarding its process and procedures used in processing applications for the PPP. For example, the Bank was recently named in a purported class action lawsuit against a number of banks where the plaintiffs allege several claims relating to the failure of the named banks to pay purported agents a fee for the presentation of PPP loan applications. While we do not currently believe this litigation is material and we intend to vigorously defend ourselves, we cannot guarantee that it will be resolved in a manner favorable to the Company or the Bank or that it will not result in significant financial liability or adversely affect the Company's reputation. Additionally, if any additional litigation is filed against the Company or the Bank and is not resolved in a manner favorable to the Company or the Bank, it may result in ~~higher~~significant financial liability or adversely affect the Company’s reputation. In addition, litigation can be costly, regardless of the outcome. Any financial liability, litigation costs or damage to our reputation caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.

The Bank also has credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Bank, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Company, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

The fair value of our investment securities can fluctuate due to market conditions out of our control.

We invest in securities, including debt securities available for sale, which are carried at their estimated fair value and pretax unrealized holding gain or loss on a quarterly basis. Factors beyond our control can significantly influence the fair value of investment securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include but are not limited to increases or decreases in interest rates, rating agency downgrades of the securities and defaults.

We may not be able to generate sufficient cash to service all of our debt, including the Senior Notes.

Our ability to make scheduled payments of principal and interest or to satisfy our obligations in respect of our debt or to refinance our debt will depend on ~~existing card balances. Additionally,~~our future operating performance. Prevailing economic conditions (including low interest rates and reduced economic activity due to COVID-19), regulatory constraints, including, among other things, limitations on distributions to us from our subsidiaries and required capital levels with respect to our subsidiary bank and nonbanking subsidiaries, and financial, business and other factors, many of which are beyond our control, will also affect our ability to meet these needs. We may not be able to generate sufficient cash flows from operations, or obtain future borrowings in an amount sufficient to enable us to pay our debt, or to fund our other liquidity needs. We may need to refinance all or a portion of our debt on or before maturity. We may not be able to refinance any of our debt when needed on commercially reasonable terms or at all.

105

We and Amerant Florida Bancorp Inc., the ~~implementation~~subsidiary guarantor, are each a holding company with limited operations and depend on our subsidiaries for the funds required to make payments of ~~new processes involves operational risks,~~principal and interest on the Senior Notes.

We and the ~~change~~subsidiary guarantor are each a separate and distinct legal entity from the Bank and our other subsidiaries. Our and our subsidiary guarantor’s primary source of funds to make payments of principal and interest on the Senior Notes and to satisfy any obligations under the guarantee, respectively, and to satisfy any other financial obligations are dividends from the Bank. Our and the subsidiary guarantor’s ability to receive dividends from the Bank is contingent on a number of factors, including the Bank’s ability to meet applicable regulatory capital requirements, the Bank’s profitability and earnings, and the general strength of its balance sheet. Various federal and state regulatory provisions limit the amount of dividends bank subsidiaries are permitted to pay to their holding companies without regulatory approval. In general, the Bank may only pay dividends either out of its net income after any required transfers to surplus or reserves have been made or out of its retained earnings. In addition, the Federal Reserve and the FDIC have issued policy statements stating that insured banks and bank holding companies generally should pay dividends only out of current operating earnings.

Banks and their holding companies are required to maintain a capital conservation buffer of 2.5% in addition to satisfying other applicable regulatory capital ratios. Banking institutions that do not maintain capital in excess of the capital conservation buffer may face constraints on dividends, equity repurchases and executive compensation based on the amount of the shortfall. Accordingly, if the Bank fails to maintain the applicable minimum capital ratios and the capital conservation buffer, dividends to us or the subsidiary guarantor from the Bank may be prohibited or limited, and there may be insufficient funds to make principal and interest payments on the Senior Notes or to satisfy any obligation under the guarantee.

In addition, state or federal banking regulators have broad authority to restrict the payment of dividends, including in circumstances where a bank under such regulator’s jurisdiction engages in (or is about to engage in) unsafe or unsound practices. Such regulators have the authority to require that a bank cease and desist from unsafe and unsound practices and to prevent a bank from paying a dividend if its financial condition is such that the regulator views the payment of a dividend to constitute an unsafe or unsound practice.

Accordingly, we can provide no assurance that we or the subsidiary guarantor will receive dividends from the Bank in an amount sufficient to pay the principal of, or interest on, the Notes or to satisfy any obligations under the guarantee. In addition, our right and the rights of our creditors, including holders of the Senior Notes, to participate in the assets of any non-guarantor subsidiary upon its liquidation or reorganization would be subject to the prior claims of such non-guarantor subsidiary’s creditors, except to the extent that we or the subsidiary guarantor may ourselves be a creditor with recognized claims against such non-guarantor subsidiary. The Senior Notes will be guaranteed only by Amerant Florida Bancorp Inc.

We may incur a substantial level of debt that could materially adversely affect our ability to generate sufficient cash to fulfill our obligations under the Senior Notes.

Neither we, nor any of our subsidiaries, are subject to any limitations under the terms of the indenture governing the terms of the Senior Notes from issuing, accepting or incurring any amount of additional debt, deposits or other liabilities, including senior indebtedness or other obligations ranking equally with the Senior Notes. We expect that we and our subsidiaries will incur additional debt and other liabilities from time to time, and our level of debt and the risks related thereto could increase.

106

A substantial level of debt could have important consequences to us, holders of the Senior Notes and our shareholders, including the following:

making it more difficult for us to satisfy our obligations with respect to our debt, including the Senior Notes;

requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for other purposes;

increasing our vulnerability to adverse economic and industry conditions, which could place us at a disadvantage relative to our competitors that have less debt;

limiting our flexibility in planning for, or reacting to, changes in our ~~credit card strategy may disrupt,~~business and ~~have unintended adverse effects on,~~the industries in which we operate; and

limiting our ~~deposit, loan~~ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions and ~~wealth management relationships with our existing credit card holders.~~other corporate purposes.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~Not applicable.~~None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~None.

107

ITEM 6. EXHIBITS



Exhibit Number	Description
~~3.1.1~~4.1	~~Amended~~Indenture, dated as of June 23, 2020, among the Company, Amerant Florida Bancorp Inc., and ~~Restated Articles~~The Bank of ~~Incorporation of the Company~~New York Mellon, as Trustee (incorporated herein by reference to Exhibit ~~3.1 to the Company’s Registration Statement on Forms S-1/A, filed on November 16, 2018).~~
~~3.1.2~~	~~Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1~~4.1 to the Company’s Current Report on Form 8-K, filed on June ~~7, 2019)~~23, 2020).
~~3.2~~4.2	~~Amended and Restated Bylaws of the Company, effective~~First Supplemental Indenture, dated as of June ~~5, 2019~~23, 2020, among the Company, Amerant Florida Bancorp Inc., and The Bank of New York Mellon, as Trustee (incorporated herein by reference to Exhibit ~~3.2~~4.2 to the Company’s Current Report on Form 8-K, filed on June ~~7, 2019)~~23, 2020).
4.3	Form of Global Note (included in Exhibit 4.2) (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on June 23, 2020)
4.4	Form of Notes Guarantee (included in Exhibit 4.2) (incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, filed on June 23, 2020).
10.1	~~2018 Equity~~Employment Agreement, dated as of May 18, 2020, between Amerant Bank, N.A. and ~~Incentive Compensation Plan, as amended~~Carlos Iafigliola (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on May 18, 2020).
22	List of Guarantor Subsidiaries
31.1	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002, by Millar Wilson, Vice-Chairman and Chief Executive Officer.
31.2	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002, by ~~Alberto Peraza, Co-President~~Carlos Iafigliola, Executive Vice President and Chief Financial Officer.
32.1	~~Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the~~ ~~Sarbanes-Oxley Act of 2002, by Millar Wilson, Vice-Chairman and Chief Executive Officer.~~
~~32.2~~	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002, by ~~Alberto Peraza, Co-President~~Millar Wilson, Vice-Chairman and Chief Executive Officer.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002, by Carlos Iafigliola, Executive Vice President and Chief Financial Officer.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data (embedded within XBRL documents)

108

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		AMERANT BANCORP INC. (Registrant)

Date:	August ~~12, 2019~~7, 2020	By:	/s/ Millar Wilson
			Millar Wilson
			Vice-Chairman and Chief Executive Officer (Principal Executive Officer)

Date:	August ~~12, 2019~~7, 2020	By:	/s/ ~~Alberto Peraza~~Carlos Iafigliola
			~~Alberto Peraza~~Carlos Iafigliola
			~~Co-President~~ Executive Vice President and Chief Financial Officer (Principal Financial Officer)

88109



	Three Months Ended June 30, 2018
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	30,503		$	33,672		$	3,671		$	4,272		$	72,118
(Reversal of) provision for loan losses	(1,814		)	(1,750		)	(354		)	4,068			150
Loans charged-off
Domestic	—			(2,355		)	—			(98		)	(2,453		)
International	—			(52		)	—			(230		)	(282		)
Recoveries	4			269			—			125			398
Balances at end of the period	$	28,693		$	29,784		$	3,317		$	8,137		$	69,931



	Six Months Ended June 30, 2018
(in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and Others		Total
Balances at beginning of the period	31,290		32,687		4,362		3,661		72,000
(Reversal of) provision for loan losses	(2,635	)	(1,215	)	(1,045	)	5,045		150
Loans charged-off
Domestic	—		(2,737	)	—		(117	)	(2,854	)
International	—		(52	)	—		(630	)	(682	)
Recoveries	38		1,101		—		178		1,317
Balances at end of the period	28,693		29,784		3,317		8,137		69,931



	June 30, 2018
(in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and Others		Total
Allowance for loan losses by impairment methodology
Individually evaluated	$	4,055	$	2,252	$	—	$	—	$	6,307
Collectively evaluated	24,638		27,532		3,317		8,137		63,624
	$	28,693	$	29,784	$	3,317	$	8,137	$	69,931
Investment in loans, net of unearned income
Individually evaluated	$	11,078	$	16,206	$	—	$	306	$	27,590
Collectively evaluated	3,078,004		2,184,226		371,498		558,231		6,191,959
	$	3,089,082	$	2,200,432	$	371,498	$	558,537	$	6,219,549



Net income	$	12,857		$	10,423	$	25,928		$	19,852
Plus after-tax restructuring costs:
Restructuring costs before income tax effect	2,736			—		3,669			—
Income tax effect	(588		)	—		(789		)	—
Total after-tax restructuring costs	2,148			—		2,880			—
Plus after-tax total spin-off costs:
Total spin-off costs before income tax effect	—			3,200		—			6,038
Income tax effect (3)	—			519		—			(59		)
Total after-tax spin-off costs	—			3,719		—			5,979
Adjusted net income	$	15,005		$	14,142	$	28,808		$	25,831

Basic earnings per share	$	0.30		$	0.25	$	0.61		$	0.47
Plus: after tax impact of restructuring costs	0.05			—		0.07			—
Plus: after tax impact of total spin-off costs	—			0.08		—			0.14
Total adjusted basic earnings per common share	$	0.35		$	0.33	$	0.68		$	0.61

Diluted earnings per share (4)	$	0.30		$	0.25	$	0.60		$	0.47
Plus: after tax impact of restructuring costs	0.05			—		0.07			—
Plus: after tax impact of total spin-off costs	—			0.08		—			0.14
Total adjusted diluted earnings per common share	$	0.35		$	0.33	$	0.67		$	0.61



	Six Months Ended					Year Ended
(in thousands, except percentages)	June 30, 2019					December 31, 2018
	Amount			%		Amount			%
Deposits
Domestic	$	12,903		0.4	%	$	178,567		6.3	%
Foreign:
Venezuela	(228,972		)	(8.5	)%	(453,221		)	(14.4	)%
Others	2,764			0.8	%	(15,633		)	(4.4	)%
Total foreign	(226,208		)	(7.5	)%	(468,854		)	(13.4	)%
Total deposits	$	(213,305	)	(3.5	)%	$	(290,287	)	(4.6	)%

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